United Arab Emirates - Growth of a Nation

United Arab Emirates Growth of a nation

An official publication of the Embassy of the United Arab Emirates in London

Ultra Electronics and Emirates Advanced Investments Group LLC, contributing to the Growth of The Nation through their joint venture, Al Shaheen.

www.ultra-electronics.com

www.alsa.ae

www.eaig.ae

United Arab Emirates Growth of a nation

GT Media ME in conjunction with Newsdesk Media Publisher Khaled Algaay Editor-in-chief Barry Davies Managing editor Jane Douglas Chief sub-editor Victoria Green

An official publication of the Embassy of the United Arab Emirates in London

Art director Jean-Philippe Stanway Art editor Herita MacDonald

Published by

Production and distribution manager Elizabeth Heuchan

GT Media ME Ltd, 145-156 St John Street, London EC1V 4PY, UK Tel: +44 (0) 20 7608 5137 www.ainalmusafer.com

Sales manager Laurie Pilate Project manager Mohamed Isman Publishing director Anne Sadler Managing director Andrew Howard Chief operating officer Caroline Minshell President Paul Duffen Chairman and chief executive Lord David Evans

In conjunction with

184-192 Drummond Street, London NW1 3HP, UK Tel: +44 (0) 20 7650 1600 www.newsdeskmedia.com

Printed by Masar Printing & Publishing

© 2014. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. The views and opinions expressed by independent authors and contributors in this publication are provided in the writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of the Government of the United Arab Emirates, Newsdesk Media or GT Media ME and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of advertisements in this publication does not in any way imply endorsement by the Government of the United Arab Emirates, Newsdesk Media or GT Media ME of products or services referred to therein.

UNITED ARAB EMIRATES – GROWTH OF A NATION 3

Clear skies.

Broad horizons.

That is how we see your future.

And ADIB can help you get there.

An Islamic bank built on a strong foundation of trust.

One that does what it says and says what it does.

Breaking barriers. Not promises.

Always making you feel at home.

Speaking to you clearly and simply.

One that knows banking is about people and principles.

And succeeds only when you succeed.

BEST OVERALL ISLAMIC BANK

BEST OVERALL BANK IN THE UAE IN CUSTOMER SERVICE

BEST ISLAMIC BANK IN THE MIDDLE EAST

By Sheikh Khalifa Excellence Award

By Islamic Finance News

By Ethos Consultancy

2012

2012-13

2011-12-13

By Financial Times

MOHAMMED BIN RASHID AL MAKTOUM BUSINESS AWARD

SKEA GOLD CATEGORY

2013

2013

adib.ae Banking as it should be.

BASEL CHAKOUR/ALAMY

Contents Foreword

09

HE Abdulrahman Ghanem Almutaiwee, CVO Ambassador of the United Arab Emirates to the United Kingdom

Profiles

13 HH Sheikh Khalifa bin Zayed Al Nahyan Ruler of Abu Dhabi President of the UAE

17 HH Sheikh Mohammed bin Rashid Al Maktoum

Ruler of Dubai Vice President and Prime Minister of the UAE ALI HAIDER/EPA/ALAMY

19 HH Sheikh Dr Sultan bin Mohammed Al Qasimi Ruler of Sharjah

21 HH Sheikh Saud bin Saqr Al Qasimi Ruler of Ras Al Khaimah

23

HH Sheikh Humaid bin Rashid Al Nuaimi

Ruler of Ajman

24 HH Sheikh Saud bin Rashid Al Mualla

Ruler of Umm Al Quwain

25

HH S heikh Hamad bin Mohammed Al Sharqi

Ruler of Fujairah

26

From black gold to desert jewel

38

The UAE economy roars ahead

44

Foreign investment surges as UAE steps up its competitiveness

48

Spreading the wealth

52

Building a secure future: Abu Dhabi Economic Vision 2030

Forty-two years after its founding, it is clear that the federation’s path to prosperity was not the product of mere chance, but the result of vision and planning

All the indicators are positive as the non-oil economy moves into a higher gear

Burgeoning interest by investors in the wake of the UAE sharpening its global offering has put the country on the road to hitting $14 billion in FDI this year

Using its vast wealth, the UAE is pursuing a foreign investment strategy that will ensure a prosperous future for its population after its oil reserves have run dry

The emirate is on track to be a model of sustainable development for the world

UNITED ARAB EMIRATES – GROWTH OF A NATION 5

KARIM SAHIB/GETTY IMAGES

Prospects and partnerships

56

The Expo factor

62

The global Islamic economy and finance hub

66

UAE Vision 2021: towards the golden jubilee

70

Empowering women

The rewards to be accrued from hosting the World Expo in 2020 will extend well beyond the pure fiscal into cultural interaction and infrastructure development

EXPO 2020

CONTENTS

Dubai has fired the starting pistol on a host of initiatives that will see the emirate realise its goal of becoming the international centre for the Islamic economy

Women are playing an ever-increasing role in driving the economy and steering society, as the emirates continue to overturn outdated stereotypes

Banking and finance

74

GALLO IMAGES/ALAMY

With seven years to go, the federation has mapped out a vision for safeguarding the prosperity, security, stability and way of life of the United Arab Emirates

Banking on greater prosperity

As banks report solid increases in profits, the federal government is taking steps to fortify its financial institutions and diversify its fast-growing economy

With the number of banks following Sharia law on the rise, there is a greater need to review the structures, governance and discipline of Islamic banking

88

Dubai takes the lead in sukuk

94

Free to zone in on growth

100

The rise of sovereign wealth funds

The establishment of its Global Sukuk Centre last year has helped spur the emirate’s ambition to be an international focal point for Islamic finance

The Dubai International Finance Centre is increasingly being recognised throughout the world as the gateway to the Gulf, the Middle East and North Africa

104

With several sovereign wealth funds, each with different mandates, the UAE is ideally placed to take advantage of their increased influence

A new era for UAE insurers The growth potential of this industry in the GCC region is extremely promising

Oil and gas

109

INTERVIEW: HE Suhail bin Mohammed Faraj Faris Al Mazrouei

112

Abundant resources in a mature oil province

118

Understanding the major operators

The UAE’s minister of energy on the future of the country’s oil and gas sector

The outlook for the hydrocarbon industry is bright, with recoverable oil reserve levels unchanged since 2004 due to the use of enhanced recovery techniques

CELIA PETERSON/GETTY IMAGES

Sharia: growing at a rapid pace

An overview of the UAE’s key players in oil and gas production

UNITED ARAB EMIRATES – GROWTH OF A NATION 7

MATILDE GATTONI/CORBIS

82

124

Boosting the recovery factor

128

A broad spectrum of oil and gas projects

134

Embracing the private sector

138

Renewable energy to power economic diversification

The commercial viability of the UAE’s use of enhanced oil recovery to raise extraction rates from mature fields has been bolstered by firm oil prices

KEVPIX/ALAMY

CONTENTS

Innovative advances in technology are playing an important role in the growing number of on- and offshore oil and gas developments emerging in the federation

State-controlled oil and gas companies are tapping into the private sector’s innovative approach and expertise by collaborating with various businesses

The UAE is investing billions in balancing its economy by developing alternative sources of power as it looks to diversify its economy away from oil and gas

Construction, infrastructure and development

143

Foundations for the future: Dubai in the spotlight

147

Building a global hub

152

Real estate revival

156

Masdar: city of the future

160

Communicating potential

A $7 billion Expo 2020 investment programme encompassing transport, hospitality and retail-based infrastructure projects will enhance Dubai’s brand

Property prices and rental yields across the board are on the rise, but each of the emirates represents a different prospect

Eco-friendly Masdar City in Abu Dhabi is leading the world in smart-from-the-start design, and in the process it is creating its own entrepreneurial ecosystem

Opportunities for private investors to break into the UAE’s telecommunications market are opening up as consumer demand for non-traditional services grows

164

Aiming high: mission to Mars As part of its targets for economic development and diversification, the UAE plans to launch the Islamic world’s first mission to the Red Planet by 2021

Tourism and culture

166

Seven emirates, one destination

176 178

Directory of investment consultants and organisations

The past decade has seen the UAE’s tourism offering rise to international prominence, yet despite their success, the emirates’ ambitions in this arena are far from sated

Index of advertisers UNITED ARAB EMIRATES – GROWTH OF A NATION 8

CLINT MCLEAN/CORBIS

An infrastructure development boom is sweeping through all the emirates

FOREWORD

Growth of a nation These pages chart the story of the UAE’s rise and introduce our country’s leading growth sectors.

On first impressions, the remarkable flourishing of our economy is a familiar tale – ‘from sand to silicon’, as it has sometimes been dubbed. That rapid development is usually associated with ambitious skyscrapers, the world’s finest touristic resorts, our international trading hub in Dubai and the hydrocarbons industry in Abu Dhabi.

But this collection of articles builds on those popular perceptions with nuance and detail, as well as offering an insight into our trajectory for the future. Among the compelling pieces is a feature on Abu Dhabi’s innovative low-carbon project, Masdar City, which highlights the UAE’s position as a global leader in research and development in renewable energy. You will also find an exploration of the role of women in Emirati society, which gives examples of women who run government ministries and multi-million-dollar businesses in the UAE. And, of course, a preview of some of our plans for the World Expo in 2020, which is to be hosted by Dubai – the first time an Arab city will have that honour. These exciting developments make me proud of what we have achieved as a young nation, but immensely hopeful for our future too.

I hope you will share in my optimism after reviewing these stories, and share in the growth of our nation.

His Excellency Abdulrahman Ghanem Almutaiwee, CVO Ambassador of the United Arab Emirates to the United Kingdom and Northern Ireland

UNITED ARAB EMIRATES – GROWTH OF A NATION 9

ADVERTISEMENT

Maximising confidence Mahmud Merali, Managing Partner, MERALI’S, on business challenges

Mahmud Merali The global economic crisis has placed greater importance on the need for strong corporate governance, internal auditing and risk management procedures.

Corporate governance is a key factor in sustaining economic growth, and as conditions change, so too must risk management priorities.

Thus, internal auditors should consider, firstly, whether they are aligned with the

The reform of insolvency and creditor-debtor regimes can improve economic efficiency and strengthen market resilience in times of crisis. Reforming insolvency laws to provide a clearer and more transparent means for a company to reorganise would benefit the national economy by reducing the costs of capital for UAE companies over the medium to long term. A bankruptcy law is already in place. However, it has not been tested by any company, leading to legal uncertainty about how it could be applied in practice.

Best practice corporate governance provisions can play an important role in enhancing the confidence of investors.

The Commercial Companies Laws do not currently specify any accounting standards framework for the preparation of financial statements.

The Central Bank of the UAE has made it mandatory for banks to prepare their accounts as per International Financial Reporting Standards (IFRS). Listed companies prepare their accounts as per IFRS. In the absence of any specific standards framework in the UAE, most practising firms apply IFRS in the preparation of financial statements, and apply International Standards of Auditing while auditing financial statements. The Real Estate Regulatory Agency (RERA) of the Land Department also recommends that the financial statements of building owners’ associations should be prepared as per IFRS. Dubai’s Jointly Owned Property Law (Law No. 27 of 2007) establishes a framework for the development and subdivision of developments into such units and common parts, under the ‘jointly owned property’ subdivision.

Each development in Dubai comprises not only a number of units, but also common use areas designed for the unit

Organisations must understand the overall level of risk embedded within their activities strategy and direction of the company.

By focusing on the firm’s long-term strategy, understanding the impact of short-term initiatives on this strategy, and aligning themselves accordingly, internal auditors will be better able to address risk management activities throughout the organisation. Risk may drive strategic decisions, be a cause of uncertainty or simply be embedded within an organisation. An enterprise-wide approach to risk management enables consideration of the potential impact of all types of risks on processes and services.

For all firms, there is a need to understand the risks being taken when seeking to achieve objectives and attain the desired level of reward. Organisations must understand the overall level of risk embedded within their activities.

owners. The law states that an owners’ association (OA) being made up of all the unit owners is responsible for not only the management, but also the operation and maintenance of the common areas.

For each development, the developer must file a ‘jointly owned property declaration’ with the Land Department. RERA has made it mandatory to submit the annual audited financial statements of OAs. Under the Strata Law, OAs must appoint an auditor at the first AGM. At the end of the financial year, the auditor will evaluate the annual financial statements, and can give guidance to the board during the initial transition phase. The Strata Law accounts for this and provides OAs with the power to hold a lien on the property of those who have not paid their respective charges. If homeowners are able to successfully navigate the numerous financial and legal implications of the Strata Law, they will be able to take greater control over the management of their properties. The OA management is also responsible for the collection of service charges from owners. The Strata Law does not allow for non-payments of service charges to be written off. An issue, therefore, may arise if it is difficult to find an owner for non-payment. www.oxfordbusinessgroup.com/country/Dubai

MAHMUD MERALI Group Managing Partner mpkmerali@meralisgroup.com Dubai : +971 50 273 7030 UK : +447 86 032 3264

The R

| UK | UAE | SAUDI ARABIA | KENYA | UGANDA | RWANDA | IRAQ |

Plan with us... for a global solution MERALI’S is a firm of chartered accountants and management consultants providing the highest quality of professional services to their clients.

Awarded the prestigious Platinum Approved Employer Trainee Development status by the Association of Chartered Certified Accountants (ACCA), MERALI’S has further substantiated its professional excellence with its classification amongst the more prominent and professionally valued audit firms registered with the UAE’s much esteemed Dubai Financial Services Authority (DFSA) and the Real Estate Regulatory Agency (RERA).

With a professional yet individualistic approach, the work ethic in the firm is that of hard work, honesty and trust. MERALI’S provides a range of accountancy and business advisory services to assist you with a full spectrum of advice from compliance to facilitating growth locally and internationally so Plan with Us.

MAHMUD MERALI Group Managing Partner mpkmerali@meralisgroup.com Dubai : +971 50 273 7030 UK : +447 86 032 3264

The Report 2013 - v4 - UK.indd 1

10/08/14 11:03:21 AM

46262_al_nabooda_corporate_ad_fp_uae_the_growth_v3.indd 1

4/27/14 4:54 PM

PROFILES

IRAN

HH Sheikh Khalifa bin Zayed Al Nahyan Ruler of Abu Dhabi QATAR

President of the UAE Gulf of Oman

Arabian Gulf ABU DHABI

OMAN

SAUDI ARABIA

His Highness Sheikh Khalifa bin Zayed Al Nahyan is the second president of the United Arab Emirates and 16th ruler of Abu Dhabi. He succeeded his late father His Highness Sheikh Zayed bin Sultan Al Nahyan, who passed away on 2 November 2004 and from whom Sheikh Khalifa has said he learned “the need for patience and prudence in all things”.

His Highness was then re-elected president in 2009.

Sheikh Khalifa’s accession to the presidency was the culmination of a career of leadership that began in 1966 when, aged just 18, he was appointed the president’s representative and head of the emirate’s court in the eastern region of Abu Dhabi. He became Crown Prince of Abu Dhabi and was appointed as head of the Abu Dhabi Department of Defence in 1969, and then in 1973 assumed the role of vice president in the federal UAE cabinet.

Sheikh Khalifa has brought his long experience at senior levels of leadership to bear in charting the modernisation of the UAE. Under his direction, Abu Dhabi has achieved considerable success internationally and is recognised for its state-of-the-art infrastructure, its stable economy and the improved quality of life of Emiratis.

Sheikh Khalifa’s focus on civil nuclear energy is seen as a model in the region, and he was also instrumental in setting up the headquarters of the International Renewable Energy Authority in Abu Dhabi’s Masdar City complex.

Under Sheikh Khalifa’s leadership, both the Federal Government and the Government of the Emirate of Abu Dhabi have undergone major restructuring. In February 2006, new ministries were created to streamline and modernise the business of government, and new focus was placed on community development. Under his direction, the Ministry for Federal National Council (FNC) Affairs assumed responsibility for reforming the political process by introducing indirect elections for half of the FNC’s membership.

Sheikh Khalifa has presided over significant governmental changes Speaking to the nation on the UAE’s National Day on 2 December 2005, Sheikh Khalifa acknowledged that the years ahead would see the FNC empowered to play a bigger role in supporting and guiding the government’s executive arm.

Sheikh Khalifa has not only presided over significant governmental changes, but also extensive progress in the social sphere, in which he has taken steps to ensure that the people of Abu Dhabi benefit from the country’s rising wealth and has pushed forward reforms to underpin national and regional security and stability.

UNITED ARAB EMIRATES – GROWTH OF A NATION 13

PROFILES

QATAR

Arabian Gulf ABU DHABI

ROBERT HARDING WORLD IMAGERY/ALAMY

SAUDI ARABIA

OMAN

Abu Dhabi, energy-rich capital of the United Arab Emirates, has one of the fastest-growing economies in the region. It is the world’s fifth largest exporter of oil, holding about nine per cent of the planet’s proven reserves.

The emirate, which covers an area of 67,340 square kilometres, comprises nearly 200 islands with a coastline that extends some 700km. Making up around 87 per cent of the UAE, Abu Dhabi occupies a strategic location for major business centres in Europe, Asia, Africa and North America, enabling speedier access to key markets, including China, Russia and India.

Home to 2.5 million people, the city is the second most populous city in the United Arab Emirates, and is safe, clean and virtually crime-free. The government has diversified the economy so that today it encompasses cultural tourism, aviation, financial services, manufacturing, healthcare and renewable energy.

Last year, Abu Dhabi registered growth of 5.2 per cent, according to official statistics. Although slower than the government has previously estimated, the growth rate was still above 2012’s figure of 4.8 per cent.

Through investment in free zones, airports, ports, financial services and tourism, the government is promoting non-oil activity to sustain steady economic growth of around four per cent annually in years to come. The non-oil sector is projected to overtake oil by 2025 when oil’s contribution to gross domestic product will decrease to 40 per cent and to less than 20 per cent by 2050. According to an official report, Abu Dhabi’s real GDP is expected to hit $315 billion by 2025.

In June 2014, the results of the first Abu Dhabi Innovation Index were released, which show that, based on international standards, the emirate has made great headway towards becoming an innovative, knowledge-based society. The report, prepared in collaboration with the graduate business school INSEAD, shows that although the emirate remains dependent on natural

resources, it has emerged as highly efficient and adept at acquiring and distributing knowledge, new technologies, products and services across it economy.

Under the Abu Dhabi Vision 2030, the city’s development will be optimised through a 25-year programme characterised by urban evolution. The 2030 milestone represents a time when growth forecasts indicate that the emirate will have achieved significant economic diversification, and the economic plan seeks to preserve the cultural heritage of the emirates in a modern setting. Central pillars of the agenda include a large, empowered private sector, a sustainable, knowledge-based economy, optimisation of the emirate’s resources, and domestic and international security. Priority areas include economic development, development of social and human resources, infrastructure development and environmental sustainability, and the optimisation of government operations.

Last year, Abu Dhabi registered growth of 5.2 per cent As part of the development plan, Abu Dhabi has targeted a reduction in the unemployment rate to five per cent, which is expected to contribute to the emirate’s rise in GDP and support healthy growth in income and wealth for the population.

Currently generating more than 55 per cent of the UAE’s GDP, the emirate provides a very conducive environment to investors and encourages foreign direct investments in key sectors including manufacturing, industry, energy, hospitality, retail and tourism. The government is developing a number of specialised economic zones offering various tax-free incentives to encourage further foreign direct investment.

UNITED ARAB EMIRATES – GROWTH OF A NATION 14

Marine ingenuity

Dredging In just two words, marine ingenuity, we express that we are passionate dredging and marine contractors with a worldwide innovative approach to meet your challenges.

Our people - who manage a versatile fleet - specialise in dredging, marine engineering and offshore projects (oil, gas and wind).

www.vanoord.com

Dredging and Marine Contractors

Offshore Oil & Gas

Offshore Wind Projects

55x65.5cm Desert Storm

OCTOBER – NOVEMBER 2014

MICHAEL BOURG EOIS M E M O R I E S A R R E S T E D I N S P A C E

O N E & O N LY R O YA L M I R A G E – D U B A I Al Sufouh Road, Jumeirah Beach, Dubai 37252, United Arab Emirates

Having explored different stylistic approaches for many years, Bourgeois has taken his artistic vision to another level. His new show 'Memories Arrested in Space' will be launched in Dubai, where the ancient desert meets the cosmopolitan charms of the coast. www.michaelbourgeois-art.com

For more information please contact enquiries@michaelbourgeois-art.com

Curated by Magdalena Kruszewska

PROFILES

HH Sheikh Mohammed bin Rashid Al Maktoum Ruler of Dubai

Vice President and Prime Minister of the UAE IRAN Arabian Gulf

DUBAI Gulf of Oman

OMAN His Highness Sheikh Mohammed bin Rashid Al Maktoum is the vice president and prime minister of the UAE and ruler of Dubai.

He became ruler of Dubai in January 2006 after the passing of his brother His Highness Sheikh Maktoum bin Rashid Al Maktoum.

Sheikh Mohammed, who was born on 15 July 1949, laid the foundations of modern Dubai. He became Crown Prince of Dubai in 1995 and played a significant role in reshaping the emirate’s infrastructure and economy through his wise policies and leadership charisma. His strategy has shaped the emirate’s distinctive role as a trade and transport hub and furthered its goal of becoming an international financial centre to rival London and New York.

Sheikh Mohammed has overseen the drive to recover from the impact of the global financial crisis in 2008 and build a sustainable economic model in Dubai. He has been a focal personality who is pressing the UAE case for greater regional trade integration to form a more competitive trade bloc.

Sheikh Mohammed also supports humanitarian causes, having launched initiatives to fight poverty, provide education and spread knowledge in the world’s poorest countries. This work is carried out through the Mohammed bin Rashid Al Maktoum Charity and Humanitarian Foundation, Dubai Cares and Noor Dubai.

Dubai, gateway to the Middle East and Africa, is recognised as the commercial capital of the UAE. With a population of over 2.1 million, it accounts for around 30 per cent of the UAE economy. Renowned for its hospitality and rich cultural heritage, the emirate attracts millions of leisure and business visitors annually thanks to year-round sunshine, beautiful beaches, intriguing deserts, luxurious hotels and an array of shopping malls.

Home to the world’s busiest airport (Dubai International Airport), the world’s biggest shopping mall (The Dubai Mall) and the world’s number-one international airline (Emirates), Dubai has positioned itself as a top regional hub for trade, retail, tourism, banking, transport and logistics. It also boasts the globe’s tallest tower (Burj Khalifa), highest all-suite hotel (Burj Al Arab) and the largest man-made harbour (Jebel Ali).

Dubai, with an area of 3,885 square kilometres, is the second-largest emirate. Its economy is now diversified and no longer reliant on oil, which now represents just two per cent of annual GDP – although this is expected to reach five per cent in 2014. The emirate is an established location in both corporate and entertainment circles for conferences, shows and exhibitions.

Dubai is currently gearing up to host World Expo 2020, and set itself a target of welcoming 20 million tourists annually by 2020. Last year, the emirate’s more than 600 hotels and apartments received 11 million tourists, a 10.6 per cent increase over the previous year. It has launched massive infrastructure and hospitality projects. This year, Sheikh Mohammed stated the UAE’s plans to create a space agency and send an unmanned mission to Mars in 2021.

Having set up various industry-specific free zones, the government is now introducing transparent economic and trade policies to encourage foreign investment. Dubai is determined to exploit its key location between Asia and Europe, which enables it to play an integral role in global trade.

UNITED ARAB EMIRATES – GROWTH OF A NATION 17

Unlocking potential

At Petrofac, we specialise in helping our oil and gas customers develop, operate and maintain their assets.

With more than 18,000 employees and operations in 29 countries, we are a leading provider of oilfield services to the international oil and gas industry.

We design and build oil and gas facilities – both on and offshore – and operate, manage and maintain them on behalf of our customers.

Where we can leverage our service capabilities, we provide a fully integrated service under flexible commercial models and will deploy our own capital in these projects.

We think globally but work locally: training and development of national workforces and partnering with local companies is at the core of our approach.

For more information on our integrated solutions, visit www.petrofac.com

PROFILES

HH Sheikh Dr Sultan bin Mohammed Al Qasimi Ruler of Sharjah IRAN Arabian Gulf SHARJAH Gulf of Oman

OMAN His Highness Sheikh Dr Sultan bin Mohammed Al Qasimi became the ruler of Sharjah and a member of the United Arab Emirates’ Supreme Council in 1972. He is the 18th ruler of the emirate in a chain of Al Qasimi rulers since the year 1630. He also served as the UAE minister of education from 1971-72. Sheikh Dr Sultan has led the social, economic and cultural development of Sharjah and devoted considerable effort and resources to promote intercultural interactions and dialogues among peoples across the globe.

Sheikh Dr Sultan holds a bachelor of science in agricultural engineering from Cairo University (Egypt), a doctor of philosophy with distinction in history from the University of Exeter (United Kingdom) and a doctor of philosophy in political geography from Durham University (UK).

Sheikh Dr Sultan has actively promoted the establishment and development of numerous organisations, museums, institutes and associations fostering culture, the arts and science, academia, cultural and national heritage conservation, commerce, industry and agriculture. Sheikh Dr Sultan has also authored a number of important scholarly texts as well as plays, which have been translated into many languages, including English, German, French, Spanish, Russian and Urdu, among others.

Sharjah, extending over an area of 2,600 sq km, is the UAE’s third-biggest emirate, occupying 3.3 per cent of the total area of the country [excluding the islands]. Its population exceeds 900,000 and it accounts for about five per cent of the UAE’s gross domestic product and eight per cent of total non-oil GDP annually.

Sharjah, which was named ‘Capital of Islamic Culture’ for 2014, is the only emirate with direct access to both the Arabian Gulf and the Gulf of Oman through port developments on both coasts, offering a gateway to 160 countries and two billion people.

The emirate offers two highly successful free zones – Sharjah Airport International Free Zone and Hamriyah Free Zone . Its four largest economic sectors are: real estate and business services [20 per cent]; manufacturing [16 pecent]; mining, quarrying and energy [13 per cent]; and wholesale and retail [12 per cent]. There are a range of investment opportunities in fastgrowing sectors such as transportation, logistics and healthcare.

The emirate has built up a solid manufacturing sector and is now focusing on developing green business and sustainable tourism. With its rich history, culture and traditions, Sharjah it is an undisputed world-class tourist destination, particularly popular within the Arab world. Attractions include more than 20 museums, a centre for Arabian wildlife and a leading aquarium.

The Sharjah Investment and Development Authority [Shurooq] takes the lead role in promoting investment in hospitality and tourism infrastructure.

It is intent on developing a spectrum of modern projects across economic tourism and investment sectors by 2015. To this end it has created a favourable investment climate and is keen to develop its east coast for eco-tourism and water sports activities. It is promoting cruise tourism by attracting leading international liners and tour operators.

UNITED ARAB EMIRATES – GROWTH OF A NATION 19

Helping the nation reach new destinations

2002630 Etihad Rail FP Ad Final.indd 1

2/2/14 4:10 PM

PROFILES

HH Sheikh Saud bin Saqr Al Qasimi Ruler of Ras Al Khaimah IRAN RAS AL KHAIMAH Arabian Gulf Gulf of Oman

OMAN His Highness Sheikh Saud bin Saqr Al Qasimi became a member of the UAE’s Supreme Council and ruler of Ras Al Khaimah (RAK) on 27 October 2010 after the passing of his father, His Highness Sheikh Saqr bin Mohammed Al Qasimi.

Under his leadership, Ras Al Khaimah has continued to develop as a robust and growing market with a diversified economic base. Sheikh Saud introduced progrowth policies that brought prosperity and a dramatic increase in per capita gross domestic product. He was instrumental in setting up and restructuring some of the most successful enterprises in RAK, including Gulf Pharmaceutical Industries–Julphar and RAK Ceramics.

Sheikh Saud, who studied economics at the University of Michigan (US), recognised that the future of RAK needed to be built on natural resources, the beauty of the emirate’s landscape and the abundance of its non-oil resources. He launched broad-ranging initiatives to reform and improve the RAK economy, infrastructure and public sector, in particular education and healthcare systems.

Sheikh Saud, a careful and forward-looking leader of RAK’s uplift and fiscal stability, has guided unprecedented development and growth across the emirate especially in the hospitality sector: more than 10 international hotels have been opened with over 20 more planned for completion in the next five years.

Ras Al Khaimah, commonly known as RAK, is located at the entrance to the Arabian Gulf, just 45 minutes’ drive from Dubai International Airport. Spread across 1,684 square kilometres, the UAE’s northernmost emirate constitutes about three per cent of the country’s total area and has a population of 231,000.

With its prudent fiscal approach and programme to expand the three core sectors of its economy – tourism, logistics and industry – RAK’s economy has performed well in recent years. Not being a producer of oil, the emirate had no other choice but to establish a strong industrial base and promote itself as a tourism hub in the region.

Home to the world’s largest ceramics manufacturer – RAK Ceramics – the emirate’s strong industrial base, which contributes about 30 per cent to GDP annually, helped cushion its economy from the financial crisis.

The government is promoting the emirate as a serious investment destination by offering a range of unique benefits and partnership opportunities to foreign investors, who enjoy a 100 per cent income and corporate tax exemption, total foreign ownership and 100 per cent capital and profit repatriation.

Today, the emirate has become a centre of quarrying, manufacturing and tourism because of a strong economy paired with a stable political environment and a strategic location for investment. Its amazing beaches, pure air and picturesque nature lay down a solid base for continuing to build a tourism sector which already attracts more than one million visitors annually. The wide range of activities on offer include watersports, sailing cruises, desert camps, golf courses and mountain adventures. Its 64 km coastline, with clear water and white sandy beaches, is also a strong card, drawing sun-seekers from Europe and Asia.

UNITED ARAB EMIRATES – GROWTH OF A NATION 21

ADVERTISEMENT

Unipart Rail

– serving the world’s railways Experts in supply chain management and lean consultancy

Balazs Berki Head of Business Development – International As a global supply company of products and services for the rail industry, Unipart Rail has unique expertise in providing comprehensive supply chain management services that improve the effectiveness of the complete supply chain from a wide range of more than 700 global suppliers through to specific points of delivery, exactly when required.

With an international base covering both infrastructure and traction and rolling stock requirements and offices in Europe, North America, Australia and the Far East together with a network of agents and distributors in other territories, Unipart Rail is well placed to deliver service improvements in virtually any company.

By working closely with customers and suppliers, Unipart Rail organises and delivers a logistics solution that is designed to make the partners’ operations as effective as possible. This is achieved through exceptionally high levels of material availability and a fully aligned supply chain to ensure repairs and maintenance of train vehicles and national railway infrastructure operators are completed on schedule and on budget.

Utilising extensive experience in the rail industry, the company’s practitioners provide specialist systems and logistical support to supply single component parts through to a complete supply chain solution, uniquely structured for each of

the partners’ specific requirements. The range of services include a Total Product Supply Package, Logistics and Distribution support, Depot Stores Management, Inventory Management and Procurement Services, Worksite and Consigned Inventories, Fleet Aftermarket Services and Specialist Product Services which in the United Arab Emirates include the design and manufacture of train protection systems and LED Lightweight Signals.

A different kind of consultancy The sustainable processes by which Unipart Rail is able to provide such a high level of service and parts availability can also be embedded in a customer’s own organisation. Unipart Expert Practices is an integrated Consultancy Service that helps clients transform their businesses using a unique approach founded on training and developing the lean capability of their own employees.

Worldwide practitioners support the development of Lean Champions through training, exploring issues to identify solutions, the implementation of improvement activities and coaching to develop capability and drive behavioural and cultural change, thereby guaranteeing significant performance improvements are delivered and sustained.

Unipart Rail ‘turns the corner’ in lean implementation in that it delivers employee engagement, cultural change and improvement that is sustained over time. Unipart has completed consultancy projects with some of the world’s leading companies and organisations.

In addition to supply chain management and consultancy services, Unipart Rail offers a complete package of technical and engineering-based solutions to identify and resolve operational problems and concerns encountered by train operators and infrastructure operators worldwide.

These additional proposals include technical support services, products, overhaul and repair services, manufacturing services, and product technology and innovation capabilities.

Unipart Rail is part of the Unipart Group, which has 10,000 employees, a turnover in excess of $1.6 billion and operations in more than 100 countries. The company operates across a range of market sectors including automotive, manufacturing, mobile telecoms, rail, retail and technology, and offers a breadth of services from third-party logistics to expert consultancy for a growing number of internationally based blue chip clients.

For further information contact: Balazs Berki, Unipart Rail, Jupiter Building, Balby Carr Bank, Doncaster, DN4 5JQ United Kingdom balazs.berki@unipartrail.com

Unipart Rail Lean Consultancy Expertise

PROFILES

HH Sheikh Humaid bin Rashid Al Nuaimi Ruler of Ajman IRAN

Arabian Gulf

AJMAN Gulf of Oman

OMAN His Highness Sheikh Humaid bin Rashid Al-Nuaimi is a member of the United Arab Emirates’ Supreme Council and is the 10th ruler of Ajman, having succeeded his father His Highness Sheikh Rashid bin Humaid Al Nuaimi on 6 September 1981.

Sheikh Humaid, who was born in 1931, received his early education in Dubai before going to Cairo for higher studies. In 1960, he was named deputy ruler of the emirate and became involved in government affairs.

Under the leadership of Sheikh Humaid, Ajman has witnessed rapid changes, growing from a small fishing town into to a modern emirate. Sheikh Humaid has transformed Ajman into a well-developed emirate by investing in key infrastructure projects that form the foundations of industry. He has been instrumental in introducing policies to attract foreign capital inflows in key economic areas to bring prosperity and improve the quality of people’s lives in the emirate.

During Sheikh Humaid’s rule of more than 30 years, Ajman has experienced rapid growth in trade and industry as the emirate has successfully attracted commercial and industrial enterprises to its free zone.

In the latest budget initiatives, Ajman announced plans for a new airport in the Al Manama district and the development of two more ports that will boost its trade and promote tourism in the coming years.

Ajman, with an area of just 260 square kilometres, is the UAE’s smallest emirate by area and lies on the Arabian Gulf coast. The emirate is home to a population of around 316,000 people.

The Ajman economy has been largely dependent on trade, industry, and fishing. The government has invested steadily in ports, roads, transport and industrial zones to attract investment. It has implemented consistent policies to encourage foreign capital inflows, including 100 per cent freehold ownership of real estate for international investors.

Ajman has established itself as a major business centre by attracting local and international investors, which have set up operations in its free-zone, commercial and hospitality projects. It has witnessed rapid growth in recent years, having attracted several commercial and industrial enterprises, chiefly due to its close proximity to Dubai and Sharjah, as well as comparatively low rental rates.

According to the latest available official report, economic growth is driven by manufacturing [37 per cent], construction [15 per cent], wholesale, retail and repairing services [13 per cent], real estate and business services [11 per cent], and transport, storage and communication sectors [six per cent].

These five business sectors account for around 82 per cent of the emirate’s total gross domestic product annually.

Ajman has proved to be the UAE’s third most successful emirate in terms of volume and number of factories. It has more than 250 industrial firms, which constitutes 20 per cent of the total number in the UAE. Ready-made garments is the largest industry in the emirate and ranks second in the UAE in terms of the number of factories. The emirate is continuing to develop its infrastructure and broaden its economic base in order to sustain steady growth in years to come.

UNITED ARAB EMIRATES – GROWTH OF A NATION 23

PROFILES

HH Sheikh Saud bin Rashid Al Mualla Ruler of Umm Al Quwain IRAN

UMM AL QUWAIN Arabian Gulf Gulf of Oman

OMAN His Highness Sheikh Saud bin Rashid Al Mualla succeeded his father and became the ruler of Umm Al Quwain on 2 January 2009.

He is the 11th Al Mualla ruler of the emirate since the mid-18th century and also a member of the United Arab Emirates’ Supreme Council.

Sheikh Saud, who was born on 1 October 1952, received his early education in Umm Al Quwain before attending secondary school in Lebanon. He graduated with a degree in economics from Cairo University and then became involved in government affairs.

He became Crown Prince in 1982 and held a number of senior positions in the emirate.

Since then, Sheikh Saud has embarked on a period of reform and expansion of the government of Umm Al Quwain and has established a number of new departments and institutions. Sheikh Saud has introduced reforms in management and launched modern electronic systems to ease public access to government services. He has also played an active role in the development of the hydrocarbons industry in Umm Al Quwain.

Sheikh Saud is a keen advocate of the preservation of the country’s national cultural heritage and has undertaken various initiatives in this field. He is an avid follower of the traditional sport of camel racing and an enthusiastic sea angler.

Umm Al Quwain, located in the northern part of the country, is the least populous of the seven emirates, with the December 2005 census putting it at just over 49,000. It occupies an area of around 775 sq km, running along the vital trade route between Asia and India.

Traditionally reliant on industries such as cement, pharmaceuticals and glass, the emirate’s GDP makes up around one per cent of the UAE’s economy. According to official statistics, the major contributors to Umm Al Quwain’s economy are: real estate and business services [16.2 per cent], construction [15 per cent], government services [13 per cent], and wholesale, retail trade and repair services [12.4 per cent]. Fishing, pearl diving, agriculture and breeding of livestock also contribute.

The Free Zone Authority in Umm Al Quwain is the state body for registering non-resident companies, tasked with the issuing of business licences. It offers attractive benefits – including 100 per cent ownership, no tax on corporate gains or personal incomes, 100 per cent repatriation of capital and profits and exemption from import and export duties – to draw in foreign investment in key areas.

Intent on further diversifying the economy, the government plans to develop a sophisticated eco-tourism industry around the emirate’s natural beauty and historical sites. Its strategic location between the emirates of Ras Al Khaimah and Ajman bolsters the growth potential of its hospitality sector.

The emirate boasts one of the most beautiful beaches of the Arabian Gulf, while its wildlife make it an excellent place for naturalists. It also features lush coastal mangroves, large rolling sand dunes in the interior and ancient castles. The emirate is keen to attract investment in hospitality and entertainment facilities so as to realise its tourism ambitions.

UNITED ARAB EMIRATES – GROWTH OF A NATION 24

PROFILES

HH Sheikh Hamad bin Mohammed Al Sharqi Ruler of Fujairah IRAN

Arabian Gulf

FUJAIRAH Gulf of Oman

OMAN His Highness Sheikh Hamad bin Mohammed Al Sharqi has been ruling the emirate of Fujairah since 1974, following the death of his father His Highness Mohammed bin Hamad Al Sharqi. He is a member of the United Arab Emirates’s Supreme Council and also served as the country’s minister of agriculture and fisheries.

Educated in the United Kingdom, Sheikh Hamad is a progressive ruler and has guided the emirate to prosperity and development. Under his leadership, Fujairah recorded significant development in the fields of health, education and construction. His reformist leanings have held him in good stead with businessmen and expatriates alike and have helped transform the northern emirate into an important tourist destination as well as a trading hub for oil and chemical storage and products in the region.

As a result of sustained efforts and support of Sheikh Hamad, Fujairah has secured a strong presence in the world arena. During his rule, Fujairah has become a favourite destination for investors looking for a concrete investment environment, demonstrated by a number of prominent investments, and, in recent years, the location for international sports events.

Sheikh Hamad has also been instrumental in launching many strategic infrastructure and development projects in the emirate.

Fujairah is rightly known as the Jewel of Middle East. The emirate is the fifth largest in the UAE and covers approximately 1,166 sq km, or about 1.5 per cent of the total area of the country. Its population numbers around 192,000. Unlike Abu Dhabi and Dubai, which are largely covered by desert, Fujairah is almost totally mountainous and boasts a higher than average yearly rainfall for the UAE. The smaller northern emirate is the only emirate that lies on the eastern side of the country, along the Gulf of Oman, with the other six bordering the Arabian Gulf. Thanks to its strategic coastline location and ongoing infrastructural investment it is emerging as a hub for oil and chemical storage and products trading.

The emirate now boasts the second-largest bunkering port in the world, with more than 40 giant tankers passing through the Fujairah Port daily.

An oil pipeline from Abu Dhabi was inaugurated in 2012, opening a new window of opportunities for trade and investment in the region. Another refinery is under construction, along with a liquefied natural gas terminal that will further strengthen the emirate’s position in energy markets.

Fujairah Port has also become an important facility for container liners and for the world’s largest livestock shipping companies.

The government’s liberalised procedures and well-structured infrastructure provides excellent support to entrepreneurs in building, growing and diversifying their businesses.

As is the case with other emirates, Fujairah’s tourism sector has the potential to grow. It is a popular weekend destination because of its beautiful beaches, majestic mountain ranges and convivial weather conditions. Major hospitality brands are fast establishing bases in the emirate as popular watersports activities attract international tourists.

UNITED ARAB EMIRATES – GROWTH OF A NATION 25

BASEL CHAKOUR/ALAMY

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 26

PROSPECTS AND PARTNERSHIPS

From black gold to desert jewel In the 42 years since its foundation, the United Arab Emirates has evolved to become an economic bastion and a significant regional power

Dubai at sunset.

The UAE is today one of the globe’s key financial centres and trading hubs

THE UNITED ARAB EMIRATES, ONCE HOME to nomadic Bedouin tribes that eked out a living in the Gulf’s harsh desert conditions, is now a bustling cosmopolitan destination in the Arabian Peninsula.

More than 9.3 million people, according to the International Monetary Fund, occupy this area of 83,600 square kilometres.

Across the country, signs of economic recovery are visible. Rising real estate prices, soaring tourism revenues and Dubai’s successful bid to host the World Expo in 2020 have given the federation’s non-oil sector fresh impetus.

The UAE’s inclusion in the MSCI Emerging Markets Index, meanwhile, has buoyed the domestic capital market and elevated investor confidence. In 2013, the Dubai Financial Market General Index rose by almost 108 per cent.

In an interview with Gulf News in May 2014, the Institute of International Finance noted that UAE banks were in a stronger position to withstand external shocks than in 2008, with a 14 per cent increase in net profits and a drop in the non-performing-loans-to-total-loans ratio to 8.1 per cent, as recorded in 2013. A rapidly recovering property sector, where most of financial institutions’ assets are found, also bodes well for the UAE banking industry.

The UAE is the Arab world’s second largest economy. It has been endowed with “positive characteristics” that have created a stable, upbeat and attractive investment climate, said the minister of economy, His Excellency Sultan bin Saeed Al Mansouri, in the Annual Economic Report 2013.

Overall unemployment in the country was at 4.6 per cent in 2011, according to the National Bureau of Statistics, while data from the ministry of economy indicated a relatively low inflation rate at 2.12 per cent in April 2014.

In its Global Competitiveness Report 2013-2014, the World Economic Forum lauded the UAE for “managing its mineral revenues smartly,” creating national funds that encouraged growth-enhancing activities and prevented an overheating of the economy. The index showed the UAE to be the second most competitive economy in the Middle East and North Africa (MENA) region and the 19th worldwide, out of 148 countries surveyed, while its macroeconomic environment was ranked seventh globally.

As the UAE Government pushes ahead with its economic diversification plan, the spotlight turns to the non-oil sector.

Trade, logistics, hospitality, construction and manufacturing will remain the main drivers of UAE growth in 2014,

2 December 1971 Abu Dhabi, Ajman, Dubai, Fujairah, Sharjah and Umm Al Quwain together form the United Arab Emirates, over which HH Sheikh Zayed bin Sultan Al Nahyan presides and of which HH Sheikh Rashid bin Saeed Al Maktoum is vice president

1970

1971

1972

1973

1974 10 February 1972 The emirate of Ras Al Khaimah joins the UAE

1975

1976

1977

1972 The 40-seat Federal National Council (FNC) is created. The seven rulers of the UAE’s states appoint the consultative body

UNITED ARAB EMIRATES – GROWTH OF A NATION 27

9 December 1971 The UAE joins the United Nations, the Arab League and the Organisation of Islamic Cooperation

1978

1979

PROSPECTS AND PARTNERSHIPS

according to a Bank Audi report. by investment bank Alpen Capital, The UAE’s supportive business quoting data from the International Number crunch: the UAE environment has also nurtured a Civil Aviation Organization. growing small- and medium-sized The political and socio-economic 9.302 million – population enterprises sector, which now tensions in 2011 brought the region’s $403.92 billion – GDP at current prices accounts for around 86 per cent precarious position to the fore; of private-sector employment. however, they highlighted the UAE’s $43,419 – GDP per capita Located on the Arabian Gulf, the appeal as a safe haven. While the 25% of GDP – total investments UAE’s geography offers opportunities situation escalated in neighbouring 33.56% of GDP – government revenue as well as challenges. Its neighbours countries, in 2012 the UAE was able are Oman to the east and Saudi to attract $8 billion of foreign direct 22.7% of GDP – government total expenditure Arabia to the south. investments, Reuters reported. $62.85 billion – current account balance The country’s strategic location History of the federation has allowed it to become a logistics Source: 2014 estimates, IMF The UAE is a federation of seven and trade hub in the Gulf Cooperation emirates, comprising Abu Dhabi, Council (GCC), accounting for around Dubai, Sharjah, Ras Al Khaimah, Ajman, Fujairah and 30 per cent of the region’s exports, worth almost Umm Al Quwain. The country’s history as a union can be $142 billion a year, with Dubai serving as the world’s traced back to 1820, when the United Kingdom and local third largest re-export centre, after Hong Kong and rulers signed a treaty to combat piracy along the Gulf coast.

Singapore, according to PwC’s 2009 Doing Business The area then became known as the Trucial Coast and the in the Dubai International Financial Centre report. sheikhdoms as the Trucial States.

As a gateway to Asia, Europe and Africa, the UAE In 1968, after more than a century in the Gulf, the has also become one of the world’s fastest growing air UK announced its intention to withdraw from the region hubs and a popular tourism destination in the Middle by 1971. In preparation for this major development, His East. Its full-service carriers, Emirates Airlines and Highness Sheikh Zayed bin Sultan Al Nahyan, then ruler Etihad Airways, are flexing their muscles on international of Abu Dhabi, and His Highness Sheikh Rashid bin Saeed long-haul routes, while low-cost carriers Air Arabia and Al Maktoum, then ruler of Dubai, initiated the formation flydubai are increasing their market share in shortof a union of Arab emirates. Bahrain and Qatar initially and medium-haul passenger traffic. intended to become part the new entity, but retracted The UAE is the GCC’s largest aviation market, with as they declared independence from British control on approximately 63 per cent of regional passenger and 15 August and 1 September 1971 respectively. cargo traffic in 2012, according to a March 2014 report

25 May 1981 The Gulf Cooperation Council is established in Abu Dhabi. The UAE is a founding member

1980

1981

1982

1983

1984

1985

1986

15 October 1986 Sheikh Zayed is re-elected as president of the UAE for his fourth term

UNITED ARAB EMIRATES – GROWTH OF A NATION 28

1987

1988

1989

PROSPECTS AND PARTNERSHIPS

On 2 December of the same year – a day after the UK Government terminated its treaty relationship with the seven Trucial States – six of the sheikhdoms (Abu Dhabi, Ajman, Dubai, Fujairah, Sharjah and Umm Al Quwain) came together to form the United Arab Emirates, with Sheikh Zayed as president and Sheikh Rashid as vice president. Abu Dhabi, the largest of the emirates in terms of land area and natural resources, became the country’s capital. The seventh emirate, Ras Al Khaimah, joined the federation on 10 February 1972.

Zayed, former United States President Jimmy Carter said: “He never sought credit or approval for his diplomatic efforts. Yet he was tireless, even in the face of belligerence and bad faith among those he was trying to help.”

A wide reach beyond the UAE Kofi Annan, secretary general of the United Nations from January 1997 until December 2006, also lauded him as a most distinguished statesman, whose “wisdom, strong belief in diplomacy and generous assistance to developing countries also won him wide renown outside his own country – in the Islamic world and even further afield.”

When oil was discovered in Abu Dhabi in the 1950s, the UAE’s fiscal position changed abruptly, but Sheikh Zayed saw the windfall as an opportunity to make a difference to Emiratis, as well as to those in marginalised societies. Part of the emirate’s revenue from hydrocarbons was donated to the Abu Dhabi Fund for Development (ADFD), which was established in 1971 as a means of providing aid to developing nations through concessionary loans and grants. To date, the ADFD has sponsored 325 development projects worth AED35 billion ($9.53 billion) in 59 countries worldwide.

Sheikh Zayed also put a high premium on education, and used the country’s vast oil wealth to improve the national education system. Sheikh Zayed once stated that: “The best investment of our wealth is in creating cultured and educated citizens. We have to be swift and make our progress in education faster than in any other field.” Subsequently, schools, colleges and universities were built across the country, helping to empower the population in today’s fast-paced society.

Sheikh Zayed’s legacy Known in the UAE as the ‘Father of the Nation’, Sheikh Zayed ruled the federation for 33 years, from its foundation in 1971 until his death in 2004 at the age of 86. Ten years on, he remains a much-revered figure in a country that has grown exponentially. The UAE’s prosperity has often been attributed to his shrewdness and standard of governance, traits that continue to be observed in his son, Sheikh Khalifa bin Zayed Al Nahyan, who is the incumbent UAE president and ruler of Abu Dhabi.

Sheikh Zayed earned the respect and admiration not only of his people, but also of the international community.

Outside of the UAE, Sheikh Zayed made an impact on worldwide diplomacy, often being cited as a moderator who advocated dialogue and promoted peace and cooperation among nations in the Middle East. In a tribute to Sheikh

Sheikh Zayed used the country’s vast oil wealth to improve its education system

1 December 2005 Sheikh Khalifa announces plans for the UAE’s first elections

7 October 1990 Sheikh Rashid bin Saeed Al Maktoum dies. His son, HH Sheikh Maktoum bin Rashid Al Maktoum, succeeds him as ruler of Dubai and vice president of the UAE

1990

1991

1992

1993

2001

2002

2003

2 November 2004 Sheikh Zayed passes away. His legacy is a united emirates that has been transformed into a modern economic hub. His eldest son, HH Sheikh Khalifa bin Zayed Al Nahyan, succeeds him

UNITED ARAB EMIRATES – GROWTH OF A NATION 29

2004

2005

PROSPECTS AND PARTNERSHIPS

From the early days of its foundation, the UAE has been keen to get involved in efforts to promote international cooperation and regional unity. On 9 December 1971, exactly a week after its formation, the UAE was admitted to the UN, becoming one of the organisation’s invaluable members in addressing humanitarian, educational, cultural and developmental concerns worldwide. The UAE has assigned a permanent mission to the UN’s headquarters in New York and, most recently, donated $31 million to the UN World Food Programme to support emergency humanitarian operations in Syria. It was also in 1971 that the UAE joined the Arab League (or the League of Arab States) and the Organisation of Islamic Cooperation, in which it remains active in dialogues about regional issues.

Global interaction In May 1981, Abu Dhabi played host to an historic meeting that resulted in the birth of the Gulf Cooperation Council – an economic and political alliance between six nations in the Arabian Peninsula, namely Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE, also known as the Cooperation Council for the Arab States of the Gulf.

Economic integration and social cohesion were set as the ultimate goals. Over the past three decades, the council has actively coordinated on matters related not only to economy and trade, but also to security and foreign policy.

The UAE hopes to become a global investment destination and business centre by 2021, when it marks its golden jubilee

March-June 2006 Economic changes announced, including the alignment of the days of the official weekend with Western nations and the introduction of laws to reduce dependence on foreign workers and allow labourers to form trade unions

2006 20 September 2007 Dubai and Qatar become the two biggest shareholders of the London Stock Exchange

The UAE’s economic importance in the MENA region and the rest of the world is based primarily on its role as a supplier of fossil fuels. In 2012, it was the eighth largest crude oil producer in the Organisation of the Petroleum Exporting Countries, with an output of 2.8 million barrels a day, according to the US Energy Information Administration.

Its proven oil reserves were estimated at 97.8 billion barrels and natural gas reserves at 6.1 trillion cubic metres as of the end of 2012, representing 5.9 per cent and 3.3 per cent respectively of the world’s totals, according to the 2013 BP Statistical Review of World Energy.

A steady flow of hydrocarbon revenue has allowed the country to build liquidity buffers and to have a substantial nominal gross domestic product (GDP) of $391 billion in 2012, according to Rabobank’s 2013 country report on the UAE. But, in the meantime, the country has diversified its economy beyond the oil and gas sector. As one of the world’s most important financial centres and trading hubs, it has attracted foreign companies looking to establish regional head offices in the GCC and the Middle East.

The UAE’s oil wealth has also expanded abroad as its six sovereign wealth funds (SWFs) have parked their cash in various portfolios from finance and energy to real estate and technology. One of them, the Abu Dhabi Investment Authority (ADIA), made headlines in 2007 when it injected $7.5 billion of capital into Citigroup.

ADIA, which has around $773 billion of assets under management, is ranked by the SWF Institute as the second largest sovereign fund in the world, next to Norway’s Government Pension Fund Global. The UAE has also made a significant contribution to global Islamic finance, a rapidly expanding industry that has grown by over 17 per cent in

16 December 2006 First national elections. A limited number of voters choose half the members of the Federal National Council

2007

2008 20 May 2009 The UAE withdraws from plans for Gulf monetary union

2009

November/December 2009 Government-owned investment arm Dubai World asks for a moratorium on debt repayments. Abu Dhabi provides Dubai with $10 billion to meet its debt obligations, reassuring global financial markets

UNITED ARAB EMIRATES – GROWTH OF A NATION 30

Economic boom comes to a halt

February 2009 Dubai sells $10 billion in bonds to the UAE to ease its liquidity problems

PROSPECTS AND PARTNERSHIPS

the past four years. Worldwide, Sharia-compliant assets were estimated at $1.7 trillion in 2013, and are projected to rise steadily to reach $3.4 trillion by 2018, according to professional services firm Ernst & Young (EY).

In its World Islamic Banking Competitiveness Report 2013-14, EY identified the UAE as one of six rapid-growth markets (RGMs) known as QISMUT (Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey), which are important to the “future internationalisation of the Islamic banking industry”. These RGMs are believed to hold a large pool of financial and intellectual capital needed to drive the next wave of development across existing and new markets. The UAE represents five per cent of the global distribution of Sharia-compliant banking assets. Between 2008 and 2012, its Islamic banking sector has expanded by a compound annual growth rate of 14 per cent, three times faster than that of conventional banks, and has assets worth $83 billion, as well as a 17 per cent market share in the domestic financial sector, EY reported.

The UAE’s bid in the global Islamic finance hub race was also strengthened by the establishment of the Dubai Islamic Economy Development Centre in December 2013, part of an effort to encourage economic activities and promote Sharia-compliant products and services.

in February, UAE President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, said that the “Green economy [was] a key component of the state’s strategic thinking” for the future. As a result, the country hopes to obtain as much as 24 per cent of its electricity from carbon-free sources, such as solar and nuclear energy, by 2021.

With its urban population expected to reach 7.9 million by 2020, according to the UN World Urbanization Prospects report, the UAE has also embarked on ecologically conscious urban development projects, such as Masdar City in Abu Dhabi and Smart City in Dubai. Green building codes for public and private buildings have also been implemented.

The UAE has similarly embraced digital technology, networks and mobile apps as a way of delivering government services and interacting with its citizens and residents. In 2012, the country was identified by the UN as one of the world’s emerging leaders in e-government development, leaping up 21 positions in just two years to occupy the 28th ranking worldwide. Also as a part of Vision 2021, building on e-government, the UAE has already introduced an m-government initiative as decreed by His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE and ruler of Dubai. The programme recognises the sharp rise in regional smartphone penetration figures and aims to roll out government services via mobile apps to citizens, residents and tourists.

The future looks promising for the UAE, and, in a message delivered on the UAE’s 42nd National Day, Sheikh Mohammed pointed out that the country’s success story was “not a product of mere chance, but as a result of [the UAE] leadership’s vision, planning and keen interest in serving the country and its citizens.”

Future prospects The UAE hopes to become a global investment destination and business centre by 2021, when it marks its golden jubilee as a federal union. As part of this initiative, in 2010 the UAE Government launched Vision 2021, a road map for achieving sustainable national development and promoting a high quality of life for its people. In a statement published

2010

November 2013 Dubai wins World Expo 2020

March 2011 The UAE joins the international military operation in Libya

The government launches UAE Vision 2021

2011

January 2010 Burj Khalifa tower opens in Dubai as the world’s tallest building

2012

2013

2014

February 2014 Dubai agrees a deal with the UAE central bank to roll over a $10 billion bond programme

UNITED ARAB EMIRATES – GROWTH OF A NATION 31

2015

THOUGHT-LEADERSHIP

PwC’s United Arab Emirates perspective The UAE’s economic future looks bright both in the short and longer term. PwC has been working in the UAE for 40 years and is pleased and proud to be working in and promoting the UAE, and assisting business in investing and operating in the UAE through our offices in Dubai, Abu Dhabi and Sharjah We see a country with an open economy with a high per capita income and a sizeable annual trade surplus. With Abu Dhabi and Dubai as its dual financial centres, the UAE has long commanded economic leadership in the Gulf Cooperation Council (GCC).

Successful efforts at economic diversification in trade, logistics, banking, tourism, real estate and manufacturing have reduced the portion of GDP based on oil and gas output to 25 per cent. Since the discovery of oil in the UAE more than 50 years ago, the UAE has undergone a profound transformation from a relatively impoverished region of small desert principalities to a modern state with a high standard of living. The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private-sector involvement.

There is a widespread view that the economy is picking up speed, as a result of both a general recovery and Dubai’s hosting of Expo 2020, which is boosting various sectors, with some commentators suggesting growth will remain at around four to five per cent for the foreseeable future.

The UAE continues to drive to reach the highest-ranking economies across the world.

In the sixth edition of our Cities of Opportunity1 report, which looks at the pulse of 30 cities at the heart of the world’s economy and culture, Dubai was the only Middle Eastern city to feature, ranking number 16 overall.

The report highlights the remarkable progress Dubai has seen over the past few years in its efforts to position itself as a global gateway and an easy place to do business. The combination of its low

corporate tax rates, the proximity of its airports to business, its cost of living and quality of life mean that Dubai continues its ascent into the world’s top cities.

Business leaders suggest a continued and growing sense of optimism about business in the region. Our 17th Annual CEO Survey2 included opinions of 51 Middle East CEOs who also showed very bullish optimism regarding their own company’s economic growth prospects. They did, though, identify four important issues they must consider in order to build companies that are fit for the future: developing and maximising the potential of tomorrow’s workforce; creating new value in a technology-driven world; understanding the demands of a new type of consumer; and running a company in a region where climate change and resource scarcity is a very real business risk.

Project spending is expected to continue to rise, driven by the investments required around plans for mega events in the region, notably Dubai’s World Expo in 2020 and Qatar’s World Cup in 2022.

This is combined with post-Arab-Spring social spending packages – particularly on social housing, healthcare, education and training, and transport infrastructure – as well as continued investment in oilfields, petrochemicals and power-production facilities.

The UAE’s free trade zones are also helping to attract foreign investors.

Dean Kern Middle East Tax Leader and Clients and Markets Partner

1

Cities of Opportunity 6 – 2014

www.pwc.com/en_M1/ m1/publications/ cities-of-opportunity.jhtml

17th Annual CEO Survey

2

www.pwc.com/en_M1/ m1/ceosurvey/index.jhtml

THOUGHT-LEADERSHIP

Dubai headlines: the city ranks: 1st for lowest total tax rate globally 1st in construction activity 4th for attracting foreign direct investment (FDI) 7th for rate of real GDP growth

66% Middle East

of Middle East CEOs are very confident about their company’s growth prospects PwC Middle East CEO Survey 2014

Our commitment: deliver value, with you, every day Established in the region for 40 years, PwC employs more than 3,000 people and has 21 offices across 12 countries: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, the Palestinian Territories and the United Arab Emirates.

Complementing our depth of industry expertise and breadth of skills is our sound knowledge of local business environments across the Middle East region. Every day, our people work with you to build the value you are looking for. We’ll start by getting to know you. You do the talking, we’ll do the listening. Our tailored solutions will help you meet the challenges and opportunities of doing business in the Middle East market, and beyond.

For more information visit www.pwc.com/me

77% Middle East

of Middle East CEOs expect to increase their headcount next year

The UAE as an attractive hub for investors There is a wide range of factors that makes the UAE an attractive hub for investors to locate their business interests, including: • The UAE has one of the most liberal trade regimes in the Gulf region and attracts strong capital flows from across the region; • The UAE is focused on economic diversification in trade, logistics, banking, tourism, real estate and manufacturing, and provides opportunities in a wide variety of industries; • The UAE has a well-established infrastructure, strong banking system and a stable political system; • The UAE is ranked 23rd of 189 countries in the World Bank’s 2014 Ease of Doing Business Index, up from 33rd place in 2011; • Although there are restrictions on company ownership by non-GCC nationals, the UAE also provides for a window of free trade zones that can allow 100 per cent foreign ownership and a nil-taxation regime (subject to certain limitations); • The UAE provides a tax-favourable environment for most industries.

According to PwC’s 2014 Paying Taxes3 report, completed in conjunction with the World Bank, the Middle East region has the lowest total tax rate in the world; • There are a high number of expatriate workers at all levels of the economy, such that expatriates account for more than 80 per cent of the workforce; • There are no exchange-control restrictions and it is possible to have unrestricted repatriation of income and capital; • The UAE’s culture is driven by Islamic traditions. However, with more than 150 nationalities, expatriates are able to practise their own cultures; and • The UAE provides a safe and secure family environment with one of the lowest crime rates in the world.

3 Paying Taxes 2014 www.pwc.com/gx/en/ paying-taxes/assets/ pwc-paying-taxes-2014.pdf

Setting up a business in the UAE Foreign investors can carry out commercial activities in the UAE, but only after being registered and licensed by the relevant authorities in the UAE. Therefore it is important for investors to understand how to go about setting up in the UAE.

Establishing a business presence In general, a foreign investor can establish a suitable business presence in either the UAE mainland (also commonly known as ‘onshore’) or a business presence ‘offshore’.

An offshore business presence typically refers to a registration in one of the UAE free trade zones. A key difference between onshore and offshore businesses is that an overseas investor may only hold up to 49 per cent of an onshore business, and therefore needs to partner with a local business or investor, whereas an offshore business can be 100 per cent owned by a foreign investor. The UAE also allows registration of international business companies that typically act as holding companies for subsidiaries outside the UAE, allowing investors to use the UAE as its business hub for the Middle East region.

Currently, there are more than 30 established free trade zones in the UAE, and although the majority of these are in the emirate of Dubai, there are a number of free zones in the other emirates, generally linked to specific business areas such as Abu Dhabi Ports, Airports free zones, Sharjah Airport, Ras Al Khaimah free zones, Fujairah Creative City, Ahmed Bin Rashid and Ajman free zones.

Dubai is also home to the Dubai International Financial Centre (DIFC), which is specifically targeted at financial services businesses.

What type of business should you use?

There are a number of issues and choices that need to be carefully considered when setting up a business in the UAE. As set out below, there are different ways in which businesses can be established and structured, and many of the regulations that apply to businesses will vary depending on the initial choice of location and business structure. It is therefore important to spend time understanding the

options, taking advice (both professional and from those who currently operate in the market and understand it) in order to identify and then execute the optimal approach for your business.

The main principles and forms of business structure for inward investment and operation in the UAE are set out below, but the right choice will depend on the current and future requirement of the specific business.

There are foreign ownership restrictions for onshore entities that restrict foreign ownership to a maximum 49 per cent equity.

The remaining 51 per cent must be held by a UAE national or companies wholly owned

by UAE nationals. It is therefore important to choose the right Emirati business partner for your business, be clear about the commercial arrangements for both parties, and have a joint view on how to manage change and growth over time. Offshore entities set up in free zones are usually able to be 100 per cent owned by a foreign company.

The types of business entities commonly adopted by foreign companies are generally limited liability companies (LLC) or branches of foreign companies. The other options, including partnerships and joint stock companies, are usually not selected by foreign investors.

An LLC can be formed by a minimum of two and a maximum of 50 persons and should have a share capital that is sufficient to meet its business needs. It takes approximately eight to 12 weeks to incorporate an LLC, since there are a number of steps and supporting legalised documentation to complete in the incorporation process.

Foreign companies and free zone companies are allowed to set up branches in the wider emirate, provided they obtain the proper licence from the Department of Economic Development and the approval of the Ministry of Economy. A branch has no separate legal personality from the parent company and there are some restrictions on the activities that a branch may undertake.

A UAE national service agent, sometimes referred to as a ‘sponsor’, must be appointed to represent a branch in all administrative dealings with government departments (such

THOUGHT-LEADERSHIP

as immigration formalities). The remuneration of the sponsor is normally agreed on an annual fixed-fee basis; it is a matter of commercial agreement and can vary depending on the prominence of the sponsor and the precise contribution the sponsor makes to the business of the branch. It takes approximately eight to 12 weeks to establish a branch.

Most companies or branches are required to have their accounts audited locally, and these accounts will then need to be filed with the appropriate emirate-level authorities on an annual basis as part of the licence-renewal filing process. There is also an annual licencerenewal fee to be paid that is based on the type of licence, entity and its activities. There are similar requirements for free trade zone entities, although the requirements and fees vary and need to be considered based on the legal entity set up and its location.

The seven emirates and many free zones have different regulations Since the UAE comprises a federation of seven emirates, namely Abu Dhabi, Dubai, Sharjah, Fujairah, Ras Al Khaimah, Umm Al Quwain and Ajman. There are a multiplicity of federal and local rules and regulations.

The free trade zones are governed by their own regulatory authorities and have their own rules and regulations. They are typically tailored to specific industries and only licence specific types of activities.

The regulations for establishing and operating a business in the zones are generally less rigorous and time consuming than those applying to entities located in the onshore UAE. The registration requirements are more or less similar across the free trade zones and involve a two-stage process. The first stage is to obtain an initial approval from the free trade zone authority and the next stage is to apply for a trade licence and registration. The free trade zones also provide a choice of establishing either a company or a branch. It normally takes up to six to eight weeks to complete a registration, though this may vary for different free trade zones.

Paying tax in the UAE The UAE’s tax-free reputation is only partially correct. In fact, most of the emirates constituting the UAE federation introduced corporate income tax decrees in the late 1960s and local corporate taxation is therefore determined on an emirate-by-emirate basis.

Tax residence under the tax decrees of the various emirates is based upon the French concept of territoriality. Basically, this concept taxes profits based on territorial nexus, rather than taxing profits earned outside the country.

Under the emirate-based tax decrees, corporate income taxes may be imposed on all companies (including branches and permanent establishments) at rates of up to 55 per cent. In practice, however, none of the emirates currently impose any corporate

income tax, with the exception of oil and gas companies and branches of foreign banks having operations in the emirates that are subject to a tax charge.

Entities established in a free trade zone in the UAE are treated differently from a normal onshore UAE entity. Free trade zones have their own rules and regulations and typically, from a tax perspective, they offer guaranteed tax holidays to businesses (and their employees) set up in the free trade zone for a period of between 15-50 years (which are mostly renewable).

While there is no federal or local personal income tax, there is a social security regime in the UAE that applies to employees who are GCC nationals. Generally, for UAE nationals the social security payment is at a rate of 17.5 per cent of the employee’s gross remuneration as stated in an employee’s employment contract and applies regardless of the free zone tax holidays. Five per cent is payable by the employee and the remaining 12.5 per cent is payable by the employer.

The rates can differ in different emirates.

The withholding obligation is on the employer. There are no social security payments for expatriates.

There is currently no VAT in the UAE. However, the UAE (along with the other member countries of the GCC) has committed, in principle, to introduce a VAT system and has made significant progress towards its introduction. At this point in time there is no confirmation on the introduction of VAT or, if brought in, its rates or how this will effect business operations in the UAE (onshore or in free trade zones).

There are a lot of other levies too, which can be regarded as taxes by any other name.

A recent tourist levy is a good example. Most emirates impose a five to 10 per cent hotel tax on the value of hotel services and entertainment, and municipal property taxes are levied in various forms, generally as a percentage of the annual rental value.

Employment requirements and Emiratisation Employment of both UAE nationals and others is governed by federal labour law, and the employment of expatriates generally requires the approval of the UAE Ministry of Labour. The Emiratisation policies of the Labour Department encourage and even,

THOUGHT-LEADERSHIP

in some instances, compel the employment of a certain percentage of UAE nationals in certain job sectors.

In the case of employment contracts where an employment is with an onshore

company, the employee has to enter into a standard Ministry of Labour contract.

This contract forms the basis to obtain sponsorship to work or a ‘work permit’ in the UAE.

Where the employee is employed to work in one of the free zones in the UAE, the free zones will provide their own standard form of employment contract, where applicable, which an employer and employee will be required to enter into before the free zone obtains sponsorship for the employee to live and work in the UAE. Some free zones do not require such employment contracts to be made.

In practice, given that the content of either a Ministry of Labour contract or a free zone contract is fairly basic, employers enter into an additional form of contract with the employee. It is good practice to have a fully fledged employment contract detailing the terms of employment.

A key feature of UAE employment is the statutory severance payment that employees are entitled to. This is based on the employee’s basic salary and years of service.

Other considerations for businesses Culture, living and working

The daily working hours are arranged so that employees are not required to work for more than five consecutive hours without breaks for rest, meals and prayers.

The total of such breaks must be at least one hour that will not be included in the daily working hours.

There are specific regulations and practices including circulars issued by the Ministry of Labour regarding reduction of work hours for construction labourers during the summer months of June, July, August and September.

In practice, small and retail businesses work on a two-shift system. Larger corporate bodies, commercial and professional firms work 40-45 hours a week with a two-day break on Fridays and Saturdays. Government ministries work around 35 hours a week.

During the Muslim holy month of Ramadan, normal working hours in the private sector are reduced by two hours per day. The law also provides for leave of not more than thirty days without pay, for making a pilgrimage to Mecca once during the employment period. This leave period cannot be deducted from the employee’s other leave entitlements.

The UAE’s culture is rooted in Islamic traditions. In spite of its rapid economic development in recent years, the UAE remains closely linked to its heritage.

Courtesy and hospitality are among the most highly prized of virtues, and this is reflected in the warmth and friendliness of the Emirati people. UAE society is marked by a high degree of tolerance for different lifestyles as evidenced by its high ranking in the World Bank’s Ease of Doing Business survey1.

Relationships and mutual trust are paramount for any successful business interaction and are best developed through face-to-face meetings. It is important to have connections with people in the UAE who can facilitate introductions, as these are essential to establishing successful business relationships.

The maximum normal working hours (for adult employees) is eight hours per day – 40 per week. However, these hours may be increased to nine daily for people working in the retail trade, hotels, restaurants and other such commercial establishments. The Ministry also retains the right to decide to reduce the daily working hours for hazardous and dangerous jobs or those that might be detrimental to health.

Customs law

The World Bank Index

The UAE generally levies customs duties on imported goods at the rate of five per cent.

1

Higher rates of duty apply to goods such as alcohol and tobacco. A number of categories of goods are exempt, such as certain agricultural products, printed material and pharmaceuticals. Exemptions may also be granted for goods imported for industrial or manufacturing purposes.

Where goods are imported into a UAE free zone, customs duties are not payable.

However, duty will normally be payable if these goods are subsequently exported to the UAE or other GCC states.

Goods may only be imported into the UAE by an entity that has a registered presence in the UAE and such goods must

THOUGHT-LEADERSHIP

be in accordance with the licensed business activity of the business.

Free trade agreements The UAE is a member of the GCC Customs Union, which has a common customs law and common external tariff (although there are exceptions on a country-by-country basis).

The member states are the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait and Oman. Trade between the member states is generally duty-free.

In respect of goods imported from a non-member state, customs duties are generally levied upon the first entry of those goods into the customs union.

The GCC is currently negotiating free trade agreements with a number of countries and trade blocs, including the European Union, China, Australia, India and Malaysia.

The UAE is also a member of the Greater Arab Free Trade Area. This agreement provides for the duty-free trade of certain goods between signatories to the agreement.

“The Middle East is looking forward to a golden decade, as it finds itself hosting two of the world’s largest events within two years of one another: Expo2020 in Dubai, UAE, and the World Cup in 2022 in Doha, Qatar. Meeting the immediate needs of mega events is not a simple task. Dubai and Doha both face challenges to take their tourism sectors to the next level: Dubai currently has become one of the world’s fastest-growing destinations: even without Expo, Dubai had set itself a target of hosting 20 million visitors per year by 2020 – that’s almost double the number they have coming through now, according to our latest Middle East cities hotel forecast for 2014 1.”

Pam Jackson PwC | Middle East Relationship Partner T: +44 (0) 207 212 4300 M: +44 7711 675 381 E: pam.jackson@uk.pwc.com PricewaterhouseCoopers LLP 7 More London Riverside London, SE1 2RT United Kingdom

“The UAE has a tax advantage which is being diluted but which can remain a key attraction – CEOs told us that any tax reform will affect their business and investment decisions. Sixty per cent agreed that government tax policy and the competitiveness of local tax regimes were key factors in their organisation’s decisions about where to operate.”

Dean Kern PwC | Middle East Tax Leader and Clients and Markets Partner T: +971 (0) 4 304 3575 M: +971 (0) 56 682 0536 E: dean.kern@ae.pwc.com PricewaterhouseCoopers Emaar Square, Building 4 Level 8| PO Box 11987 Dubai, United Arab Emirates

“The Middle East tax environment is evolving. In their desire to become attractive and efficient places to do business the Emirates are looking to strengthen their fiscal frameworks by introducing measures to reduce complexity, such as, electronic filing and e-payments. There is also a shift towards a more territorial approach to taxation along with an expansion of the tax treaty network in a number of regional economies such as UAE and Saudi Arabia, and then there is the prospect of VAT in the GCC. Investors need to incorporate these issues in their strategic planning process.”

Scott Hamilton PwC | Tax – Partner T: +971 (0) 4 304 3039 M: +971 (0) 56 216 9849 E: scott.hamilton@ae.pwc.com PricewaterhouseCoopers Emaar Square, Building 4 Level 8| PO Box 11987 Dubai, United Arab Emirates

Middle East cities hotel forecast for 2014 pwc.com/m1/en/publications/middle_east_hotels_forecast.jhtml 1

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

PROSPECTS AND PARTNERSHIPS

The UAE economy roars ahead Macroeconomic fundamentals remain optimistic as the non-oil sector fuels much of the Gulf country’s growth

THE UNITED ARAB EMIRATES IS ON A solid growth trajectory, with gross domestic product (GDP) expected to be 4.4 per cent in 2014, as forecast by the International Monetary Fund (IMF), while it is anticipated that the non-oil economy will drive most of the fiscal activities in the coming years.

Near-term trade prospects are upbeat, with the UAE’s Trade Confidence Index being the highest of the 25 countries surveyed by HSBC in its March 2014 Global Trade Forecast Report. The UAE scored 141 (100 denotes a neutral reading) – a nine-point jump from six months earlier and an all-time high since the first survey in 2009.

Hydrocarbon revenues still form a major part of the UAE’s federal budget, but the recent softening of oil prices in the global market and the shale gas revolution in North America are expected to reduce the country’s current account surplus from 15 per cent of GDP in 2012 to above 10 per cent in 2013-14, Samba Financial Group predicted. Despite this, the UAE economy will continue to be buoyed by renewed public spending and fresh private-sector activities ahead of Expo 2020 in Dubai.

Domestic banks are on a sound footing, according to Samba. Stress tests conducted jointly by the IMF and UAE Central Bank determined that the banking system could still absorb a significant increase in non-performing loans, with only a few falling somewhat below the mandated minimum capital adequacy ratio in the event of an extreme shock.

Overall business growth expectations in the UAE are optimistic, says Grant Thornton’s International Business Report (IBR) 2014. In fact, 90 per cent of business leaders expect revenues to climb over the next year, compared with 52 per cent globally, while 66 per cent believe profits will rise, compared with 40 per cent internationally. Maintaining a stable political environment tops the UAE Government’s agenda. As a result, the federal budget for 2014 includes a 4.5 per cent increase in total spending, prioritising social welfare and development initiatives amid efforts to reduce contagion risks from regional unrest, Bank Audi says.

Emad Tinawi, government partner at the Dubai office of PwC, believes a stable political system is one factor fuelling optimism about the UAE. The country’s sizeable

Downtown Dubai. The UAE’s economy will be boosted by private-sector activities in the run-up to Expo 2020 in Dubai

UNITED ARAB EMIRATES – GROWTH OF A NATION 38

RAMESH YADAV/ALAMY

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 39

PROSPECTS AND PARTNERSHIPS

oil resources, geographical location, modern infrastructure and public transport system, as well as its reputation as a logistics and financial hub, make the UAE an attractive investment destination, he said.

In addition, the UAE’s supportive business environment has encouraged entrepreneurship. The country ranks 23rd worldwide and first across the Middle East and North Africa (MENA) in terms of the ease of doing business, according to the World Bank’s 2014 Doing Business report.

The UAE’s strong external positions relating to its substantial current account surpluses and huge net foreign asset holdings are positive indicators underscored by Rabobank in its May 2014 economic update. Likewise, the Gulf state’s sound monetary policy, as a result of the long-standing and credible exchange rate peg of the UAE dirham to the US dollar, has kept inflation subdued at an average of one per cent in the past five years.

A rapidly expanding and diversified economic base, however, poses future challenges for the federation, according to Tinawi. “Sustaining and managing the incredible fast pace of economic growth [has stoked] concerns about overheating and excesses.” He added that the UAE Government was also expected to work on attracting top talent in various industries and providing financing for development and infrastructure projects for less wealthy emirates, while tackling environmental challenges such as the shortage of water resources, and the political instability in the MENA region.

When the UAE was formed in 1971, it was seen as an experiment of unification, but today it represents the only successful attempt at building a federation in the modern Arab world, points out Bertelsmann Stiftung, a non-profit foundation based in Germany. While each of the seven emirates maintains sovereignty, particularly in areas

Changes to the investment law are expected to increase gross domestic product by between three and four per cent such as administration, economic affairs and social policy, and even control over their respective natural resources, they remain committed to the federation as a whole.

In a bid to address each emirate’s concerns on a federal level and encourage intra-federal cooperation, in 1972 the UAE Government convened the Federal National Council (FNC), an advisory body formed under the country’s 1971 provisional constitution. The council comprises 40 members representing the seven emirates; 20 of them are elected by UAE citizens through a general election and 20 are chosen by an electoral college and the rulers of each emirate.

As an advisory council, the FNC has discussed various economic and social issues affecting the Emirati people.

According to The National newspaper, since 1972 the council has held 493 sessions, during which members have debated seven constitutional amendments, passed 533 bills and discussed 282 issues of public interest. On the international level, the FNC has released 67 statements on local, Arab and international issues that are of interest to the UAE and has reviewed 675 international treaties and agreements.

Legal and regulatory developments Developments in the legal and regulatory framework have been encouraging. In April 2014, the minister of economy, His Excellency Sultan Saeed Al Mansouri, announced major changes to the investment law, which will be introduced at the end of the year. The law, which is expected to increase GDP by between three and four per cent, will, according to the minister, “help the UAE markets become more favourable to foreign investments in non-oil sectors such as tourism, real estate and finance”. Ross Barfoot, a corporate partner in the Abu Dhabi office of global law firm Clyde & Co,

UNITED ARAB EMIRATES – GROWTH OF A NATION 40

STRINGER/CORBIS

PROSPECTS AND PARTNERSHIPS

said that the country’s legal system was very progressive and developments were proof that economic growth was supported. “The government recognises that efficiency and accountability are to be improved and the legislative framework and law-making process are being reviewed and enhanced to ensure maximum efficiency.

“In 2012/13, more than 500 cabinet decisions were [taken] in 13 key sectors of planned growth in the UAE’s quest to be number one in global competitiveness,” Barfoot said. He added that the increased attention coming from international investors, many of which will seek to impose global-standard corporate-governance regimes, will help to encourage the development of an increasingly sophisticated legal market in the UAE. John Martin St Valery, founding partner of the Links Group, a Dubai-based company-formation think tank, said that foreign firms’ interest in expanding operations into the UAE remained very high. “There is no doubt that any developments in the UAE’s legal and regulatory framework

UAE Vice President and Prime Minister, and Ruler of Dubai HH Sheikh Mohammed bin Rashid Al Maktoum addressing the Federal National Council (FNC) in Abu Dhabi. The FNC was formed to encourage intra-federal cooperation

will help the UAE become more favourable to foreign investors,” he commented. “This is particularly important as the country seeks to attract more foreign direct investment.

Progressive regulatory frameworks help encourage businessmen and investors to be more active and creative.”

Economic diversification While the oil and gas industry has provided the essential foundation for the country’s economy, with its eyes towards the future, the UAE is striving to diversify its fiscal position away from hydrocarbon income. In recent years, the federation has reaped the benefits of its diversification plan. The non-oil sector represented AED690.3 billion ($188 billion) or 67.3 per cent of its GDP in 2012 and will remain a significant source of revenue for the country in the years to come, according to the ministry of economy’s Annual Economic Report 2013.

The property sector has made a comeback in the country, generating AED55.2 billion ($15 billion) or 17.8 per cent

UNITED ARAB EMIRATES – GROWTH OF A NATION 41

FINNBARR WEBSTER/ALAMY

PROSPECTS AND PARTNERSHIPS

of the GDP in 2012, the report mentioned. At the same time, the construction industry continued to gather steam as it contributed AED12.5 billion ($3.4 billion) or four per cent to the economy during the period. The Dubai Chamber of Commerce and Industry anticipates that construction will account for in excess of 11 per cent of GDP by 2015 as further projects are given the green light.

Information and communication technology contributed 3.2 per cent to GDP in 2012 as mobile penetration in the UAE reached 200 per cent – one of the highest in the world – the UAE Telecommunications and Regulatory Authority reported. Internet usage, meanwhile, was over 70 per cent in 2012, according to data from InternetWorldStats.com.

Travel and tourism have also been important growth factors for the country, accounting for 8.4 per cent or AED117.4 billion ($32 billion) of GDP and creating a total of 496,500 jobs in 2013, the World Travel and Tourism Council’s latest figures show. By 2024, the direct contribution of travel and tourism to the UAE’s economy will grow by as much as 3.1 per cent per annum to AED80.1 billion ($21.8 billion), four per cent of GDP.

Construction work under way in Dubai. The construction industry is expected to account for more than 11 per cent of GDP by 2015

The drive for Emiratisation Emiratisation has become an important component of the UAE’s domestic policy as it seeks to build a more sustainable economy. The programme promotes a high integration of the national workforce into both the public and private

sectors, and is one of the government’s efforts designed to empower its citizens. Between 2014 and 2021, the government hopes for a tenfold rise in the number of nationals working in the private sector, which is currently dominated by expatriate workers. The seven-year National Agenda comes as the UAE faces the challenge of revitalising the national labour market, where unemployment among Emiratis was at 20 per cent in 2012, according to Rabobank.

The high jobless rate is partly because most UAE nationals often prefer to work in public agencies or governmentrelated entities, where wages and benefits are higher than the private-sector equivalents.

In a statement made at the launch of the agenda in January 2014, Vice President and Prime Minister of the UAE, and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum said that the government would impose new measures designed to increase Emiratisation in the private sector. The banking industry, however, has proven to be an Emiratisation success story, according to INSEAD Knowledge. The sector has achieved 29 per cent Emiratisation, largely as a result of laws requiring specific quotas and growth rates for the employment of UAE nationals. Resources, for example the AED440 million ($120 million) budget under the Khalifa Fund for Emiratisation Empowerment, have also been provided by the government to train Emiratis and equip them with the skills needed in the UAE’s ever-changing jobs market.

UNITED ARAB EMIRATES – GROWTH OF A NATION 42

ADVERTISEMENT

Nurturing achievement Jackie Jones, Head of International Development, CACHE, talks about heritage and developing links with the UAE and international partners At CACHE we are proud not only to have Her Majesty Queen Elizabeth II as our patron but also of our heritage, which spans more than 70 years and has seen our qualifications delivered worldwide.

Originally established by the United Kingdom’s Ministry of Health in 1945 as the National Nursery Examination Board, we merged with the Council for Early Years Awards in 1994 to form CACHE. During this time as the UK’s only specialist awarding organisation for care, health and education, we have continually invested in our core business, the development of high-quality vocational qualifications. CACHE qualifications range from Entry Level to Level 5 and are written and developed by experts in the sector to meet the needs of both industry and the workforce. Our qualifications have helped millions of learners to raise professional standards in the care, health and education sectors, earning us the reputation of being specialists and market leaders in the field and setting the gold standard for early years care and education both in the UK and across the globe.

CACHE’s mission: to be the awarding organisation of choice in care, health and education for learners and employers in the UAE

Since 2008 CACHE qualifications have been delivered in the United Arab Emirates by a range of training providers to learners and staff working in kindergartens, nurseries and schools. Last year over 150,000 learners registered with CACHE from over 1,000 UK and international centres, including hundreds of learners from Dubai, Abu Dhabi and the rest of the UAE, where we continue to grow and attract new partners.

Professor Pat Preedy, GEMS Education Global Chief Academic Officer for Early Childhood Education said “It is particularly important to ensure that staff working with our young children are well qualified and highly trained. After considering a range of possibilities we chose to partner with CACHE. CACHE has a history of providing highly regarded qualifications and provides excellent ongoing support and training for those delivering the qualifications.

CACHE qualifications are an excellent platform for raising standards within schools and settings.”

CACHE develops and endorses new qualifications for a global market with international learners in mind and an understanding of the important role that high-quality qualifications and education has in the development of a nation.

At CACHE we believe our understanding of the needs of the UAE market, our qualifications, and our quality and service-driven approach support the Emirates’ aspirations to create an

environment for early childhood development that adopts global best practices and takes into consideration each state’s cultural identity and the region’s diversity.

Nick Cutland, CACHE CEO, said “CACHE is committed to engaging with the international market and we are especially delighted to work in the UAE and support the growing and diverse educational needs of this dynamic nation.”

CACHE’s international team visits the UAE regularly to meet with staff in CACHE Centres, to support their growth and development and ensure the ongoing quality of their provision and therefore their contribution to the development of a skilled workforce.

To find out more about becoming a CACHE International Centre: Jackie Jones, Head of International Development E: info@cache.org.uk W: www.cache.org.uk

PROSPECTS AND PARTNERSHIPS

Foreign investment surges as UAE steps up its competitiveness FDI is forecast to hit $14 billion in 2014 as global investors take advantage of the United Arab Emirates’ buoyant economy, supportive tax environment and newly strengthened legal framework

STRATEGICALLY SITUATED AT THE crossroads of trade and commerce between East and West, the United Arab Emirates has turned its geographic location into one of its biggest assets.

Since its establishment in 1971, the hydrocarbon-rich Gulf state has emerged as an import and export hub of global proportions, and a preferred base for businesses serving the local, regional and international markets from South Asia to Africa and beyond. The country’s status as a leading commercial centre endures today, as global investors flock to the country in order to take advantage of its buoyant economy, supportive tax environment, favourable geography and world-class regulatory and legal frameworks.

Driven by an economic diversification programme that has gathered momentum over the past two decades, the UAE is gradually reducing its dependency on oil and gas, which still account for a large share of government income. Abu Dhabi, holder of almost all of the country’s hydrocarbon reserves, is developing cultural tourism by building branches of the iconic Guggenheim and Louvre museums. Other sectors, such as renewable energy and aerospace, are also at the forefront of its efforts to achieve economic diversification. Dubai, not blessed with the hydrocarbon riches of its larger neighbour, has grown its services, logistics, construction and hospitality industries – the primary drivers of growth in the emirate.

Sharp recovery in real estate Today, the UAE’s outlook is bright. Solid economic growth, driven by healthy domestic demand, is coupled with rising inward investment. In 2020, Dubai will host the World Expo trade convention, for which the emirate has pledged to spend billions on infrastructure projects. In the words of Dubai’s ruler, His Highness Sheikh Mohammed bin Rashid Al Maktoum, the emirate will “astonish the world”.

Since the global financial crisis of 2008/9, policymakers in the UAE have concentrated on recovery and growing key sectors such as logistics and energy, which have long been the foundations for the country’s economic successes. The efforts are working. The International Monetary Fund (IMF)

A model of the Louvre Abu Dhabi, which is being built as part of the emirate’s efforts to encourage cultural tourism

UNITED ARAB EMIRATES – GROWTH OF A NATION 44

EPA/ALI HAIDER/ALAMY

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 45

PROSPECTS AND PARTNERSHIPS

$ (billions)

markets, especially India (15 per cent), is predicting that the UAE will grow at Russia (10 per cent) and China a solid 4.4 per cent in 2014, supported FDI net inflows into the UAE (seven per cent). Private capital flows by tourism, hospitality and the sharp (balance of payments) from these countries far outstripped recovery in Dubai’s real estate sector. funds coming from the UK and US Published in April 2014, the IMF’s 9.6 10.0 as investors from Asia used cash World Economic Outlook survey said: to purchase properties, mainly “In the UAE, where real estate prices in Dubai. In fact, there are 4,200 are rising at a fast pace, the award 7.7 Chinese companies, 356 Chinese of World Expo 2020 has further 7.5 trading agencies and 2,500 strengthened growth prospects.”

Chinese registered trademarks in As a result of the country’s 5.5 the UAE. The number of Chinese economic resurgence and improved expatriates residing in the UAE sentiment, foreign direct investment 5.0 4.0 exceeds 200,000. Tourism from (FDI) has returned to pre-crisis China also experienced a big surge strength and is expected to jump recently, with 276,000 Chinese 20 per cent in 2014 to $14.4 billion, 2009 2010 2011 2012 tourists flocking to Dubai in 2013. according to Abdullah Al Saleh, Source: the World Bank Invesco added that the UAE undersecretary at the UAE was also a key beneficiary of private ministry of economy. FDI tripled capital flows from the GCC region, from $4 billion in 2009 to $12 billion with just over a third of investment in 2013 coming from in 2013, even against the backdrop of the global financial the Middle East and North Africa (MENA), and nine per cent crisis and the regional political unrest of the past few years. from other GCC countries. Gulf inflows to the UAE were, to “Direct investment flows into the GCC [Gulf Cooperation a large extent, driven by the instability in Syria, Egypt and Council] economies slowed in the aftermath of the Arab others parts of the MENA region. spring protests in 2011, but to some extent the UAE bucked Meanwhile, Dubai’s property market recovery is proving this trend, seeing flows begin to recover that year due to to be a boon for attracting private foreign investment. its regional safe-haven status,” says Tim Fox, chief Jones Lang LaSalle reported in February this year that economist at Emirates NBD, Dubai’s biggest bank. house prices were only 15 per cent short of their 2008 peak.

A resurgence in tourism, trade and the It was predicted that the levels seen property market in Dubai, along with before the global financial crisis would Abu Dhabi’s increased public spending be reached in around 18 months. But, on infrastructure and leisure projects, with the emirate’s booming real estate is helping the UAE to attract foreign market outpacing all major property investors, according to a 2013 United markets last year, the authorities have Nations Conference on Trade and already taken steps to prevent another Development report. bubble. Earlier this year, laws were Competitive business environment brought in to reduce speculative buying in a move that is Dubai FDI, part of the Department of Economic likely to provide stability to the housing market and instil Development, supports foreign companies wanting to greater confidence among foreign investors. Expatriates are set up local operations. It puts the emirate’s success in now required to put down a minimum 25 per cent deposit attracting investment down to its first-class infrastructure on properties valued below AED5 million ($1.36 million), and competitive business environment. Dubai attracted rising to 35 per cent for properties priced above that sum.

AED29.4 billion ($8 billion) of investment in 2012, up In the local market, Emiratis need a 20 per cent deposit 14 per cent on the previous year. The United States, the when buying for under AED5 million, with 30 per cent United Kingdom and India were Dubai’s top investors in required for purchases over that price.

2012, with the US accounting for a quarter of all capital Elsewhere in Dubai, the emergence of economic free inflows. GCC countries such as Qatar and Saudi Arabia zones, which offer foreign companies tax exemption and were also major investors, according to FDI Dubai.

100 per cent ownership, has spurred much of the growth Inflows continued to rise in 2013, with the UAE of foreign investment into its economy, according to Tim becoming an increasingly important hub for foreign Fox. Jebel Ali free zone, the largest in the MENA region, has capital. Invesco’s Middle East Asset Management Study the Jebel Ali Port on one side and the Dubai World Central found that 43 per cent of private foreign money in the ‘aerotropolis’ on the other. The free zone is home to more first half of 2013 came into the country from emerging than 7,300 companies from 125 countries.

FDI tripled from $4 billion in 2007 to $12 billion in 2013, even against a backdrop of global financial crisis

UNITED ARAB EMIRATES – GROWTH OF A NATION 46

MARKUS HANKE/CORBIS

PROSPECTS AND PARTNERSHIPS

Abu Dhabi is counting on projects such as those led by Mubadala Development Company to set up aerospace and aluminium industries in order to spearhead its economic diversification. Under its 2030 Economic Vision, the emirate has set targets for the non-hydrocarbon sector to account for 64 per cent of the economy by 2030, compared with 44 per cent in 2010. In November 2013, Airbus and Boeing both signed deals worth $5 billion with Mubadala as part of which the two aircraft manufacturers will buy locally manufactured aircraft parts. In 2012, Boeing awarded a 10-year contract to Strata, a subsidiary of Mubadala Aerospace, to make composite parts in its Al Ain factory.

Efforts are also under way to make it easier to do business in the UAE. Economists say robust economic growth and steps taken by the UAE Government to strengthen the legal framework underpin the current healthy levels of foreign investment. In 2011, the Dubai International Financial Centre court’s jurisdiction was extended nationwide across the UAE, allowing any business to use it to resolve commercial disputes. “This was important

The recovery of Dubai’s property market is proving to be a boon for attracting foreign investment

because, when you invest and you look at the potential return, you also look at the risk associated with your investment. But if there is a good, solid legal environment, it makes a big difference whether you invest or not,” said Marios Maratheftis, global head of macro research at Standard Chartered Bank in Dubai. Also, the government is set to approve a law that will make limited liability and joint-stock companies easier to manage and more attractive to investors. The law is aimed at strengthening corporate governance and boosting transparency.

A competitive economy If league tables are a good measure, then the UAE’s determination to make the country a simpler place in which to do business is reaping rewards. This year, it came 23rd out of 189 countries in the World Bank’s Ease of Doing Business Index. In addition, it was ranked the second-most competitive economy in the region after Qatar, according to the World Economic Forum’s Global Competitiveness Report 2013-2014, coming 19th overall out of 148.

UNITED ARAB EMIRATES – GROWTH OF A NATION 47

PROSPECTS AND PARTNERSHIPS

Spreading the wealth Fuelled by oil revenues, the United Arab Emirates is successfully expanding its global investment footprint

IN 1971, WHEN THE UNITED ARAB EMIRATES became independent, it decided on a twofold economic strategy: to maximise revenues from its vast oil and gas reserves, and plan for the day when these reserves run out. While the country has since invested heavily in its hydrocarbon sector and expanded value-added downstream industries such as petrochemicals, it has also embarked on a major economic diversification programme, using revenues from oil and gas exports to ensure prosperity for its population, and economic sustainability once the post-carbon age arrives.

While much of the focus has been on turning the country into a regional financial, tourism, energy and logistics hub with global reach, the UAE has also poured large portions of its considerable wealth into overseas investments, snapping up hundreds of billions of dollars’ worth of assets around the world in sectors from real estate and financial services to renewable energy and sports.

Capital outflows from public entities in the Gulf state, including sovereign wealth funds, jumped to AED95 billion ($25.9 billion) in 2011, up from AED10 billion the previous year, boosted by windfall income fuelled by a combination of strong oil demand and high prices in the aftermath of the global financial crisis.

Traditionally, the country’s sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA) – together with other wealthy state-backed funds, such as International Petroleum Investment Company (IPIC) – have been tasked with investing the UAE’s oil wealth overseas. While ADIA has a huge portfolio around the globe, with hundreds of billions of dollars deployed in a range of sectors, IPIC has invested along the energy value chain, ranging from Spain’s Compañía Española de Petróleos (CEPSA), an integrated energy company, to Canada’s Nova Chemicals Corporation, to downstream projects in the emirate of Fujairah.

Recent developments More recently, Mubadala Development Company has diversified the country’s approach to overseas investment.

Mubadala owns Masdar, a renewable energy company set up in 2006, which is spearheading efforts to build the UAE’s leadership in sustainable energies and beyond. As part of its remit, Masdar is building the first zero-carbon city on the outskirts of Abu Dhabi city, powered by the sun and

Dubai-based port operator DP World invested $2 billion in London Gateway, a deep-sea freight container port

UNITED ARAB EMIRATES – GROWTH OF A NATION 48

NICK STRUGNELL/DP WORLD

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 49

BLOOMBERG VIA GETTY IMAGES

PROSPECTS AND PARTNERSHIPS

connected by electric cars. But Masdar’s focus has become far more international in recent years. In 2013, it announced that, over the next seven years, it would invest $1.5 billion in alternative energy schemes in the United Kingdom.

The deal, signed between the UK Government’s Green Investment Bank and Masdar, was seen as an affirmation of the strong ties between the UK and the UAE – an alliance that is aimed at unlocking future investment in the sector.

Before the deal was struck, Masdar was already an investor in the London Array – the world’s largest offshore wind farm project in the south-east of the UK – alongside Danish utility DONG Energy and German energy giant E.ON. Perhaps the UAE’s most publicised investment over the past few years is Abu Dhabi’s purchase of Manchester City Football Club in 2008. This was a break from the status quo in that most of the emirate’s investments up to that point

A substation for the London Array project.

The UAE has spent hundreds of billions of dollars on global assets in many sectors, including renewable energy

stadium, leading to a positive response from the fans.

However, the impact reaches further than the stadium, Sheikh Mansour is building a state-of-the-art football academy to train Manchester’s youth and has recently agreed a £1 billion ($1.7 billion) deal with the council to build 6,000 new homes. Such has been the success of the venture that other Gulf states have followed the UAE’s lead, with Qatar buying French club Paris Saint-Germain.

Extending its commercial and football reach into the United States, Manchester City has bought a majority stake in the Major League Soccer franchise in New York. The club wants to broaden the reach of soccer into big markets, such as the US, where national games such as baseball and American football are by far the biggest sports still.

ADIA’s vast footprint

ADIA, Abu Dhabi’s sovereign wealth fund, completed deals worth $7.93 billion in 2013 had been either in stocks or property. The acquisition of the Premier League club was an ambitious foray into sports ownership, and one that has paid spectacular dividends.

Owned by His Highness Sheikh Mansour bin Zayed Al Nahyan through the Abu Dhabi United Group, the club has been transformed in recent years, winning the 2013/14 Premier League (adding to its 2011/12 title), the 2011 FA Cup and 2014 League Cup. Sheikh Mansour wrote off the club’s debt, brought in new players and revamped the

One of the UAE’s most active overseas investors from the public sector is ADIA. Founded in 1976, the sovereign wealth fund now controls an estimated $773 billion of assets under management, ranking it as one of the world’s largest, according to the US-based Sovereign Wealth Fund Institute (SWFI). ADIA still prefers – though not exclusively – blue-chip companies in developed markets. Its footprint across the world is vast and broad in scope, ranging from the purchase of direct stakes in some of the world’s biggest companies, and investment in stocks, to the backing of ambitious development and infrastructure projects in both developed as well as emerging markets.

Reflecting increased confidence in the world economy, ADIA completed deals worth $7.93 billion in 2013, thanks to a buying splurge in Europe and Australia, according

UNITED ARAB EMIRATES – GROWTH OF A NATION 50

PAUL AVIS/ALAMY

PROSPECTS AND PARTNERSHIPS

Dubai-based DP World bought port and ferry operator P&O in 2005, paving the way for new ventures

UAE ownership of ExCeL London put Abu Dhabi’s name at the centre of the 2012 Olympic Games

TRICIA DE COURCY LING/ALAMY

to the SWFI. Also in 2013, ADIA was reported to be in advanced talks to purchase a €750 million ($1.02 billion) real-estate portfolio from Swiss investment bank UBS, underlining its preference for prime real estate in Western Europe. In January 2014, the fund bought Paris-based building 90 Boulevard Pasteur from Crédit Agricole for €250 million ($340 million). However, underscoring a newer trend to diversify away from traditional developed markets such as Europe, ADIA has also announced that it plans to invest about $200 million in real estate in India.

Success in transport and logistics sectors In Dubai, one of the lasting economic success stories has been the logistics sector, the jewel in the crown being global ports operator DP World, majority owned by conglomerate Dubai World. With the global economic recovery under way and demand for goods improving, Dubai’s transport and logistics sectors are booming.

Among DP World’s biggest foreign acquisitions was the deal in 2005 to buy port and ferries operator P&O for

$5.7 billion. From that deal, the group inherited the plan for the London Gateway project and subsequently pledged to invest more than $2 billion in the freight container port at the mouth of the River Thames in the UK, which received its first cargo vessel in November 2013. DP World chairman His Excellency Sultan Ahmed bin Sulayem has said he would be willing to invest further in the UK beyond the London Gateway, if such an opportunity arose. Marios Maratheftis, global head of macro research at Standard Chartered Bank in Dubai, said: “With DP World’s investments, you can see that it fits straight into the key strengths of the economy.

Dubai World Ports are world class here, so it’s natural to see more investment abroad – it’s a natural expansion.”

A key plank of the UAE’s economic diversification strategy is its growth as a cultural, business and leisure tourism destination, marked by its flagship purchase of ExCeL London, the exhibitions and conferences centre.

Through further investment in the venue since the acquisition in 2008, the UAE has managed to turn the site into the premier events space in the UK. Abu Dhabi National Exhibition Centre chairman His Excellency Sheikh Sultan bin Tahnoon Al Nahyan said earlier this year that the ExCeL purchase was one of the company’s most important to date, raising the profile of Abu Dhabi by putting its name right at the heart of the London 2012 Olympics. ExCeL hosted a number of events during the Games, such as table tennis, wrestling and boxing.

Looking ahead to the next few years, there are no indications that the UAE’s buying pattern abroad will slow. With substantial remaining oil reserves generating significant fiscal surpluses, the country has the financial clout – against economic headwinds or not – to press on with its expansive and successful foreign investment strategy, providing security and sustainability to its population for decades to come.

UNITED ARAB EMIRATES – GROWTH OF A NATION 51

MS ope Nav the ‘Sp bei ferr and Cha Cal offe thr tha fue pas new Ret Spi car ma Fer

PROSPECTS AND PARTNERSHIPS

A model of carbon-neutral, zero-waste development project Masdar City on display at the World Future Energy Summit exhibition in Abu Dhabi

UNITED ARAB EMIRATES – GROWTH OF A NATION 52

AFP/GETTY IMAGES

PROSPECTS AND PARTNERSHIPS

Building a secure future: Abu Dhabi Economic Vision 2030 By 2030, the emirate aims to be a model of sustainable development for the Middle East and the rest of the world

ABU DHABI, CAPITAL OF THE UNITED Arab Emirates, is an economic powerhouse in itself. Deep within its deserts is buried most of the country’s hydrocarbon wealth, or, to be more precise, 92.2 billion of its total of 97.8 billion barrels of proven crude oil reserves.

The largest of the UAE’s seven emirates in terms of land area, Abu Dhabi has prudently managed its massive riches since oil was discovered on its shores in the 1950s. As a result, the emirate continues to enjoy fiscal stability and is one of the wealthiest economies in the world, with gross domestic product (GDP) per capita estimated at $110,000 in 2012, according to international ratings agency Standard & Poor’s.

Oil remains a dominant source of income for Abu Dhabi, representing 55 per cent of GDP in 2013.

But as the emirate looks to the future, it is intent on the non-oil sector playing a significantly more active role in greasing the wheels of its economy. By 2030, the capital aims to have raised the fiscal contribution of the non-oil sector to 64 per cent.

In a January 2014 report, global ratings agency Moody’s said the emirate’s diversification efforts and

the prospect of relatively high oil prices have shored up medium-term growth prospects, helping Abu Dhabi retain its Aa2 sovereign credit rating with a stable outlook. Economic diversification has also boosted the emirate’s appeal to regional and international investors.

Ross Barfoot, a corporate partner in law firm Clyde & Co’s Abu Dhabi office, said the emirate’s Vision 2030 plan and economic diversification policy will have a knock-on effect, particularly on sectors such as healthcare, education, real estate and hospitality.

Investments, he explained, are expected to come from private equity funds and regional investment companies. According to Hazem Galal, partner and global leader for PwC’s Cities & Local Government Sector, attracting foreign direct investment (FDI) and providing opportunities for private investment are key pillars for Abu Dhabi’s economic development plans. He cited ZonesCorp as one of the government’s initiatives to bring FDI into the emirate. “Through its existing and planned industrial zones, [ZonesCorp] has positioned Abu Dhabi as an attractive industrial hub. Other sectors, such as construction and tourism, will also receive their fair share of investments.”

UNITED ARAB EMIRATES – GROWTH OF A NATION 53

PROSPECTS AND PARTNERSHIPS

Mubadala Development Company, a sovereign wealth fund, has also tapped various growth sectors apart from oil and gas. The fund, which has assets worth $60.93 billion, is investing in industries including aerospace, information and communications technology, infrastructure, transport and logistics, metals and mining, renewable energy, real estate, financial services, semiconductors and utilities.

Abu Dhabi is also positioning itself as a business centre through Al Maryah Island, a 114-hectare residential, retail, leisure, hotel and commercial development. The island features a central business district called Sowwah Square.

Abu Dhabi key indicators Economy GDP at current prices (in millions of AED, 2013)

953,239

Gross fixed capital formation (% of GDP, 2013)

20.3%

Oil share (in GDP, 2013)

55%

Inflation rate (2013)

1.3%

Achieving a dynamic economy

Industry and business

Building a sustainable future is at the core of Abu Dhabi Economic Vision 2030, a programme that lays out the local government’s strategy for achieving a stable and dynamic open economy. It also seeks to promote a safe and secure environment for the society. Abu Dhabi plans to achieve these goals by focusing on four priority areas, namely economic development, infrastructure development and environmental sustainability, social and human resources development, and optimisation of government operations.

In its Abu Dhabi Economic Vision 2030 mandate, the government reiterated its commitment to further enhance the emirate’s business climate by promoting legislative reform. It also pledged to use rigorous data sources and statistical information in formulating economic policy, as it seeks to lure investors. Year-on-year investment growth has so far been encouraging, according to the Abu Dhabi Council for Economic Development. In 2011, FDI in the capital rose by 7.8 per cent compared with 2010 figures, to reach AED52 billion ($14 billion).

The emirate also endeavours to continue delivering high-quality education and health services to nationals and residents, while paving the way for the creation of a stable supply of superior jobs. This is particularly significant in the emirate’s quest to boost employment among UAE nationals.

Number of hotel rooms (2013)

26,001

Number of hotel guests (thousands, 2013)

2,806

Number of business licences (new and renewal, 2012)

74,595

Population Population (mid-year estimate, 2012)

2,334,563

Social statistics Number of schools (2012-13)

450

Number of pupils (2012-13)

325,901

Literacy rate (2012)

92.5%

Number of hospitals (2012)

39

Number of hospital beds (2012)

3,659

Number of physicians (per thousand population, 2012)

2.4

Source: Statistics Centre Abu Dhabi (SCAD)

At the start of 2013, the Abu Dhabi Executive Council announced it would inject billions into the economy over a period of five years Infrastructure development – which over the past decade has transformed Abu Dhabi into a modern, cosmopolitan city – is also crucial to the government’s 2030 ambitions.

Around $400 billion worth of projects have been announced or are under development in Abu Dhabi in sectors such as energy, manufacturing, property and infrastructure.

At the start of 2013, the Abu Dhabi Executive Council announced it would inject billions into the economy over a period of five years. Part of the fund will be used to

finance housing, school and road construction, and other infrastructure projects in a bid to strengthen the emirate’s economic competitiveness, The National reported.

Among the ‘mega-projects’ under way in Abu Dhabi are the $2 billion state-of-the-art housing development, New Khalifa City, which can house as many as 370,000 people; a $2.9 billion metro system stretching 131km to accelerate the flow of traffic in a rapidly expanding population; and the $10.8 billion Etihad Rail, which will link Abu Dhabi to Dubai and the northern emirates, and eventually connect with the planned 2,177km Gulf Cooperation Council (GCC) railway.

Abu Dhabi International Airport will also expand following completion of the Midfield Terminal in 2017.

Investment in sustainable energy Focusing on sustainability is crucial for the emirate as it prepares for the challenges of rapidly changing dynamics – most critical of which is the expected rise in population.

According to the Abu Dhabi Urban Planning Council, the population could reach between three and five million by

UNITED ARAB EMIRATES – GROWTH OF A NATION 54

PROSPECTS AND PARTNERSHIPS

240km west of Abu Dhabi city. Due to start commercial operation in 2018, the plant is expected to deliver up to a quarter of UAE’s electricity needs, reducing the country’s carbon emissions by 12 million tonnes per year, according to The National. In addition, the emirate is developing Masdar City, a carbon-neutral, zero-waste development project that seeks to become a global hub for renewable energy and clean technologies.

A further testament to Abu Dhabi’s renewable energy commitment is its hosting of the global headquarters of the International Renewable Energy Agency (IRENA).

Additionally, the Abu Dhabi Fund for Development has offered almost $350 million in annual loans to finance renewable energy projects in developing countries.

Saadiyat Island: a cultural hub in the making

ALI HAIDER/EPA/ALAMY

2030, putting enormous pressure on natural resources.

In order to address the concern, Abu Dhabi developed a 2030 Urban Structure Framework Plan, designed to respond to the current and future development needs of the emirate, establish a planning culture, and introduce strong guiding principles for any new development. The mandate on the urban plan underscored the government’s philosophy that resource efficiency is vital. As such, certain measures will be undertaken, including the exploration of renewable energy, a reduction in the consumption of non-renewable resources, and the education of future generations on the importance of conserving resources.

In recent years, the UAE capital has invested heavily in the development of more sustainable sources of energy, such as solar and nuclear. For example, in March 2013, Shams 1 – the world’s single-largest concentrated solar power plant – was inaugurated, providing 100 megawatts of electricity, enough to power 20,000 homes. Shams 1 is one of the projects that Abu Dhabi hopes will help it reach its target of generating seven per cent of domestic power from renewable sources by 2030. The emirate is also developing the UAE’s first nuclear power plant at Barakah,

A model of Saadiyat Island, off the Abu Dhabi coast, home to a growing number of luxury waterfront properties

Existing and future developments projects across some of Abu Dhabi’s islands are transforming the emirate into a multi-faceted destination. One of these projects is Saadiyat Island, located to the north-east of Abu Dhabi city.

Currently being developed by the Tourism Development and Investment Company (TDIC) as a cultural and tourism hub, the island has been divided into a number of zones, including Saadiyat Beach, Saadiyat Lagoons and Saadiyat Cultural District. It will include outposts of the Louvre and Guggenheim museums, as well as a performing arts centre and the Zayed National Museum.

Saadiyat already plays host to a number of high-end waterfront homes, including The Residences at the St Regis Saadiyat Island Resort, the Saadiyat Beach Residences and the Saadiyat Beach Villas.

The island’s leisure attractions will also leave residents and tourists spoilt for choice. It features pristine beaches, golf courses, a retail district, as well as a number of luxury hospitality developments. Education is also prominently featured in Saadiyat, with New York University Abu Dhabi and Cranleigh Abu Dhabi among the institutions building their campuses on the island.

Meanwhile, in Al Maryah Island, the $1.6 billion Cleveland Clinic was constructed to provide world-class healthcare to local, regional and international patients.

Another development that has proved successful is Yas Island, which includes hospitality, retail and entertainment attractions. The island is best known for the Yas Marina Circuit, the venue for the Formula 1 Etihad Airways Abu Dhabi Grand Prix, which attracts an audience of around 55,000 a day during the three-day event. Yas Island also features Ferrari World Abu Dhabi, a massive Ferrari-themed indoor park; Yas Waterworld, a 15-hectare family water theme park with 43 rides and slides; and Yas Links Abu Dhabi, an 18-hole championship golf course.

All of these developments are expected to contribute to Abu Dhabi’s goal of boosting annual tourist arrivals from 2.7 million in 2013 to 7.5 million in 2030.

UNITED ARAB EMIRATES – GROWTH OF A NATION 55

PROSPECTS AND PARTNERSHIPS

The Expo factor Expected to attract 25 million visitors over the course of six months, Dubai’s World Expo event is set to reap benefits reaching far beyond economics

DUBAI IS GEARING UP FOR A BOOM AFTER it won the right to host the World Expo in 2020, beating rival cities Izmir in Turkey, São Paulo in Brazil and Russia’s Yekaterinburg. The potential benefits are high, according to industry analysts. Bank of America Merrill Lynch (BAML) predicted that the emirate – a vibrant metropolis in the Arabian Gulf region – stands to generate $23 billion over the period 2015-21. This figure incorporates total spending by the host, participants and visitors, as well as on supply chain and consumption.

The global event would also lift Dubai’s gross domestic product (GDP) growth by a modest 0.5 per cent annually in 2016-19, and by about two per cent in 2020-21, the bank’s report suggested. In a separate report, Deutsche Bank said that Dubai would continue to attract investor interest, as an estimated $43 billion will be needed to significantly upgrade infrastructure, giving a boost to the real estate sector in particular. The next few years in the run-up to Expo 2020 will also see an increased demand for new hotels and improved transportation systems.

UNITED ARAB EMIRATES – GROWTH OF A NATION 56

EXPO 2020

PROSPECTS AND PARTNERSHIPS

Zones dedicated to the sub-themes mobility, sustainability and opportunity will converge at the central Al Wasl Plaza

UNITED ARAB EMIRATES – GROWTH OF A NATION 57

PROSPECTS AND PARTNERSHIPS

The Expo 2020 master plan Dubai’s Expo 2020 ambitions will take shape on a 438-hectare section of Jebel Ali, to the south-west of the city. The development will include a gated 150-hectare Expo Village, which will provide housing facilities for delegates from around 250 participating countries. The village will be surrounded by a residential, hospitality and logistics zone. Major construction activities in the Expo 2020 site are expected to be completed by October 2019, allowing for a year of readiness testing.

Another feature of the Expo 2020 site is its location within Dubai World Central, a 140-square-kilometre ‘aerotropolis’ – home to Al Maktoum International airport and an economic and residential district.

Dubai plans to make World Expo history by implementing a ‘one country, one pavilion’ policy. Three zones, each dedicated to one of the Expo 2020 sub-themes (mobility, sustainability and opportunity), will converge at the central Al Wasl Plaza.

The Expo 2020 site is designed to be easily accessible to all, regardless of age or physical ability. The Al Wasl Plaza, for example, will be within 15 minutes’ walk from any part of the site, and a driverless people-mover system will be on hand to assist visitors.

The Expo 2020 exhibition site is designed to accommodate up to 300,000 visitors at its peak, with average weekday attendance expected to be 153,000. With sustainability as one of the Expo’s core values, organisers aim to supply at least 50 per cent of the site’s energy needs via renewable sources. As a result, emphasis will be placed on integrating solar-energy technologies into the Expo site master plan.

Dubai also plans to reduce 25 per cent of water consumption on site, as well as implement a strategic approach to managing waste.

A further testament to the emirate’s commitment to sustainability is the construction of an extension to the Dubai Metro (Red Line), which will service a dedicated station on the Expo 2020 site so as to encourage usage of the mass transit system. After the event, the site will be converted into the Dubai Trade Center Jebel Ali district.

Adopting the theme ‘Connecting Minds, Creating the Future’, Expo 2020 will focus on three sub-themes: mobility, sustainability and opportunity, which are considered the pillars of Dubai’s future development strategy. Running for six months from 20 October 2020 to 10 April 2021, the event aims to attract approximately 25 million visitors during the period, more than 70 per cent of whom are expected to come from outside the United Arab Emirates. The Dubai Government also plans to spend $8 billion on infrastructure development ahead of the Expo.

As the first World Expo to be held in the Middle East, North Africa and South Asia region, Expo 2020 will offer benefits that will be felt not just in Dubai and the UAE, but in neighbouring countries too, said Shayne Nelson, group CEO at Emirates NBD: “As regional countries and organisations look to maximise the benefits of a significant

event taking place on their doorstep, the doors are expected to be open to more FDI [foreign direct investment] inflows to enable the establishment of various industries and businesses that support the hosting of Expo 2020, not only in Dubai, but also in the neighbouring emirates, surrounding GCC [Gulf Cooperation Council] states and the greater Middle East.”

Through the World Expo, Dubai and the UAE will seek to build partnerships with businesses and governments across the world, enabling the emirate to benefit from accelerated economic growth, enhanced infrastructure development and new employment opportunities, Nelson added.

The Expo Preparatory Committee (EPC) estimates that more than 275,000 jobs will be created across the region in the coming six years to service Expo 2020. These will be in sectors linked to event delivery and legacy transition plans,

UNITED ARAB EMIRATES – GROWTH OF A NATION 58

EXPO 2020

PROSPECTS AND PARTNERSHIPS

such as tourism, aviation, construction, engineering, real estate, infrastructure, logistics, transportation, hospitality and retail. From a political perspective, Emad Tinawi, partner at PwC in Dubai, said the event would “continue to solidify Dubai and the UAE’s pre-eminent regional position as the centre of political stability, economic prosperity and social progress”.

The Dubai Government plans to spend $8 billion on infrastructure development in the run-up to Expo 2020

Economic effects Expo 2020 is expected to have a positive impact on the financial landscape of Dubai and the UAE in the next few years. The EPC said preliminary estimates indicated the Expo’s economic impact to be around €17.7 billion ($24.2 billion) between 2014 and 2021, slightly higher than BAML’s forecast. As a result of renewed market confidence on the back of Expo 2020, the International Monetary Fund

raised its outlook on the UAE economy from 3.9 per cent to 4.4 per cent growth in 2014, while Egyptian investment bank EFG Hermes also revised its GDP growth projection from 4.5 per cent to 5.4 per cent, according to reports.

Professional services firm EY, in its February 2014 Rapid-Growth Markets Forecast, said that the expected developments surrounding Expo 2020 had prompted the company to upgrade its medium-term forecast for the UAE. “Although the benefits will be concentrated in Dubai, we expect spill-overs to the other emirates, and now expect total non-oil growth to average 5.5 per cent a year across 2014-2017,” EY explained.

Dubai-based lender Emirates NBD tips UAE growth in 2014 to be 4.5 per cent, with Dubai growth at 4.7 per cent.

Group CEO Shayne Nelson said that, with plans typically made five years ahead of the event, the bank expects Expo

UNITED ARAB EMIRATES – GROWTH OF A NATION 59

EXPO 2020

PROSPECTS AND PARTNERSHIPS

2020 to contribute an additional 0.5 per cent to Dubai’s growth in each initial year and one per cent closer to 2020.

He added: “This growth is the result of the large-scale construction activity, infrastructure planning and urban development expected to take place, with secondary sectors like trade, tourism, entertainment and hospitality experiencing positive fallout from this growth. A stable and robust banking sector is a necessary prerequisite for

Expo Live will be showcased in the Innovation Pavilion, a new kind of exhibition space

‘Mega projects’ put on hold, significantly slowed or not initiated are now back on track as confidence grows in the UAE

ratings agency Standard & Poor’s data. In its Q4 2013 Dubai Real Estate Market Overview, regional firm Jones Lang Lasalle (JLL) said Expo 2020 would spur hotel developments and help Dubai reach its target of attracting 20 million visitors a year by 2020. The Dubai government has introduced a number of new measures to encourage hotel investments. These include a tax exemption on new three- and four-star hotels, signalling a strategic shift towards increasing the supply of mid-priced hotel options.

With Expo 2020 stimulating the private sector, small and medium enterprises also stand to gain from the opportunities available across the UAE in the next six years, according to comments made to newspaper The National by the Dubai Economic Department.

Cultural impact such a large-scale economic activity, and we believe this will further drive the growth of both wholesale and retail banking across the country.”

Upbeat market sentiments have seen residential property prices in Dubai almost reaching 2008 peak levels, emirates247.com reported in May 2014, quoting global

With a population in excess of two million, representing more than 200 nationalities, Dubai society is indeed a melting pot, and Expo 2020 will celebrate this cultural diversity. In an opinion piece published in Khaleej Times, Javed Malik, Pakistan’s special envoy for overseas, investment and trade, summarised Dubai’s regional

UNITED ARAB EMIRATES – GROWTH OF A NATION 60

EXPO 2020

PROSPECTS AND PARTNERSHIPS

significance as the venue for a large-scale cultural event such as the World Expo. Malik wrote: “The UAE in general, and Dubai in particular, is a shining example of human cooperation where people from different cultures, diverse backgrounds and a variety of faiths have come together to achieve success and prosperity for themselves, and in the process have also contributed towards making Dubai one of the most advanced cosmopolitan cities of the modern era.”

In a white paper published in April 2014, Mutasem Dajani, regional managing partner of the UAE at professional services firm Deloitte, said Expo 2020 had a huge potential to facilitate global cultural interaction.

“The fact that Dubai is itself strategically located within four hours of a third of the world’s population, and is a bridge between developed and developing nations, gives this Expo added potential for wider impact leading up to the event and afterwards for years to come,” he said.

Following the success of its World Expo bid, Dubai is expected to embark on a massive construction spree that will roll out new attractions in time for Expo 2020.

JLL, in a recent report, said many of the ‘mega projects’ that were put on hold, significantly slowed or not initiated during the financial crisis were back on track as confidence was growing in the UAE: “The plans are more measured and there is an increased focus on phasing projects over many years in line with end-user demand.”

At night, a photovoltaic fabric structure covering the main walkways will become a spectacular display of lights and projections

Topping the emirate’s list of mega projects is the Mohammed bin Rashid (MBR) City, which will include the world’s biggest shopping mall, more than 100 hotels, a Universal Studios franchise and a public park larger than London’s Hyde Park, arabianbusiness.com reported.

Construction of the MBR City will be carried out in four phases and is due for completion in 2018-19. The first phase, known as District One, was inaugurated by Dubai’s ruler, His Highness Sheikh Mohammed bin Rashid Al Maktoum, in 2014 and will include 600 hectares of open and green space, waterways, woodlands, a water park and a 7km crystal lagoon. The entire development will have 14km man-made beaches alongside retail zones, and leisure and sports attractions, surrounded by 1,500 luxury villas.

Building programmes Another development getting under way is the $544 million Dubai Water Canal, a 2.8km waterway that will feature various shopping, leisure, residential and commercial centres, together with four world-class hotels and 450 restaurants. The canal is due to be completed by 2017.

Meanwhile, the planned $1.6 billion Bluewaters Island is set to be a waterfront tourist destination comprising retail, residential, hospitality and entertainment zones with Dubai Eye – the world’s largest Ferris wheel – as the main attraction. The project targets a 2015 completion.

UNITED ARAB EMIRATES – GROWTH OF A NATION 61

PROSPECTS AND PARTNERSHIPS

The global Islamic economy and finance hub Having set out ambitious plans to become the centre of the world’s Islamic economy, Dubai is moving quickly to meet its target

THE ISLAMIC ECONOMY CAN BE IDENTIFIED by seven key pillars that adhere to Islamic law and the Islamic ethos: Islamic finance, halal industries, halal tourism, the Islamic digital economy, Islamic art and design, Islamic information and education, and the Islamic economic standards and certification that support the preceding six pillars.

The global Islamic economy was valued at approximately $3.3 trillion in 2012, according to the State of the Global Islamic Economy Report 2013 (SGIER), produced by Thomson Reuters in association with DinarStandard. To put this in context, it ranks between the world’s fourth and fifth biggest economies, Germany and France, in terms of size.

The global expenditure of Muslim consumers on food and lifestyle sectors – which include food, clothing and fashion, travel, media and recreation, pharmaceuticals, cosmetics and personal care – was estimated to be $1.7 trillion in 2012, while Islamic finance assets were estimated at $1.3 trillion. Expenditure on halal food and lifestyle sectors is projected to reach $2.5 trillion by 2018, and core Islamic finance markets are growing at 15 to 20 per cent a year, according to SGIER. With its growth potential, the Islamic economy has been identified as a key driver for the sustainable development of Dubai’s economy.

Additionally, Dubai and other member states of the Organisation of Islamic Cooperation (OIC) consider the global development of the Islamic economy to be important not only for the benefit of the world’s 1.6 billion Muslims, but more specifically for the creation of employment for the 62 per cent of the global Muslim population who are under 30 years old.

The level of development of the Islamic economy in each country varies. Islamic finance is the most developed sector, and markets such as Malaysia and those in the Gulf Cooperation Council stand out for their more developed regulatory frameworks and ecosystems, as well as overall market share attributed to Sharia-compliant financial activities. The halal food sector follows, with highest

consumption in Indonesia ($197 billion, 2012), Turkey ($100 billion, 2012), and Pakistan ($93 billion, 2012), according to the SGIER. However, the biggest meat and live animal suppliers to OIC countries are not Muslim-majority nations; the SGIER estimates that 91 per cent of OIC countries’ meat and live animal imports, valued at $15.4 billion, come from non-OIC countries, in particular the United States, Brazil, the Netherlands, Germany and Australia. There is, in fact, a truly international Islamic economy, and its systematic and coordinated growth and development would serve to benefit a large proportion of the world’s population.

Strategy for a thriving Islamic economy Since His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the United Arab Emirates, and ruler of Dubai, announced in 2013 his vision to make the emirate the capital of the Islamic economy, a raft of initiatives have been established, with the Dubai Islamic Economy Development Centre (DIEDC) acting as coordinator. Dubai’s aim is to be the world’s reference and economic engine for the Islamic economy, and the trading point for Sharia-compliant products and services. The strategy is to put in place, by October 2016, an enabling legislative and regulatory framework and build the necessary infrastructure in which the Islamic economy can thrive.

The complete list of initiatives has not been released, but will be gradually rolled out during the implementation period, and the DIEDC will monitor their impacts, even beyond the 2016 deadline. While initiatives will primarily be implemented by the government and government reporting entities (GREs), private-sector involvement and support is considered crucial. As of May 2014, there have been no specific incentives for businesses as part of the Islamic economy initiatives, but Dubai’s institutions, such as the Dubia International Finance Centre and Jebel Ali Free Zone, already offer tax and other incentives for businesses. This is

Dubai’s aim is to be the world’s reference and economic engine for the Islamic economy

Culture and commerce: the Jumeirah Mosque, Dubai’s largest, seen reflected in the windows of a skyscraper

UNITED ARAB EMIRATES – GROWTH OF A NATION 62

DINOSMICHAIL/ALAMY

PROSPECTS AND PARTNERSHIPS

C Jum Mo larg Dub refl win sky

UNITED ARAB EMIRATES – GROWTH OF A NATION 63

PROSPECTS AND PARTNERSHIPS

Road map for Dubai to become global capital of the Islamic economy Initiative announced or implemented as of May 2014

Pillar

Islamic finance To position Dubai as the world’s leading Islamic finance centre

Dubai Global Sukuk Centre

Ongoing

Export-Import Bank

Pending

NASDAQ Dubai Murabaha Platform

Launched

Commodity Murabaha Platform on the DMCC Tradeflow Platform

Launched

Halal Index

Pending

Retakaful as key pillar

Ongoing

Sharia-compliant National Bonds saving scheme

Launched

Modernisation and management of Islamic endowments Halal industries To be the solution provider for the global halal sector

Status

Pending

Integrated Halal Zones

Ongoing

International Halal Integrity (IHI) Alliance Middle East chapter

Launched

Halal tourism Position Dubai as the destination of choice for halal and family-friendly tourism

Pending

Islamic digital economy Centre for incubation and launch of innovations that address the Muslim consumer and the Islamic economy

Pending

Islamic art and design

Pending

Islamic information and education To develop talent and launch training and development programmes aimed at the Islamic economy Islamic economic standards and certification Standards and certification support the six other pillars

Dubai Center for Islamic Banking and Finance

Launched

International centre for halal food and products

Pending

Central Sharia board for Islamic finance

Pending

Islamic corporate governance centre for financial and non-financial corporations

Pending

Islamic Economy Awards

a key reminder that Dubai’s Islamic economy does not exist in isolation, but constitutes a framework within the emirate’s overall business and economic landscape.

The bigger picture features other strategic plans, including infrastructure development (part of which is spurred on by Dubai’s hosting of World Expo 2020), Smart Dubai, and UAE Vision 2021 (a federal initiative that includes, among others, a strategy to make the UAE a world leader in transport infrastructure and ease of doing business). The pro-growth strategy seeks to transform Dubai into a leading trading, business, financial, economic and knowledge hub. Dubai’s government has promoted this broader strategy, especially since the 2008 global financial crisis that plunged the emirate into severe debt when its property bubble burst the following year.

Launched

Since recovering from its 2009 crisis, Dubai’s officials and executives have been announcing the emirate’s return to the global financial fold. London’s international bankers have been told to expect another boom, trips to South America and Canada have showcased Dubai as a globally connected hub and gateway to the Middle East, Africa, the CIS and the Indian subcontinent, and South Korean businesses have been reminded of Dubai’s role in linking Asian markets with Western economies. Businesses have also been reminded that they can leverage Dubai’s Islamic economy expertise and comprehensive facilities within an eight-hour flight of two thirds of the world’s population.

Islamic finance and halal industries are the bedrock of Dubai’s Islamic economy and the convergence of the two is long overdue. Islamic finance does not sufficiently

UNITED ARAB EMIRATES – GROWTH OF A NATION 64

PROSPECTS AND PARTNERSHIPS

JOCHEN TACK/ALAMY

Zayed Mosque in Abu Dhabi. The principles for Islamic finance are taken from Shariah law

NINO MARCUTTI/ALAMY

The statue ‘Together’ stands near the Burj Khalifa building in Dubai. Islamic art and design forms one of the pillars of the Islamic economy

The bane of the global halal products industry is the lack of unified standards. Dubai is planning an international centre for halal food and products, which aims to introduce standardisation and certification for meat products. The second phase of the plan will be to introduce standardisation and certification for toiletries and cosmetics. Dubai’s job is made easier by the UAE’s pre-existing Halal Scheme, which decides whether products produced in or imported into the country are halal.

In Islamic finance, Dubai aims to be the global hub. The first step is to become leader for the issuance, listing and trading of Islamic bonds or sukuk. For clear direction, Dubai Financial Market has already launched a comprehensive set of guidelines for all matters sukuk. In second place, the UAE trails Malaysia by a long way in terms of aggregate sukuk issued from 1996 to September 2013, at $47.9 billion compared with Malaysia’s $324.6 billion, and Malaysia does not seem likely to lose its momentum in the foreseeable future. The onus is on Dubai to develop liquidity at home and attract regional activity as well as new corporate and sovereign issuers looking for cost-effective, efficient and accessible platforms.

The path to success For Dubai, launching all 46 initiatives by October 2016 is key to its becoming the world’s capital of the Islamic economy. If the emirate meets this challenge, it will have laid the foundation for a comprehensive framework for the Islamic economy. The hard work does not stop there.

DIEDC and other stakeholders would also need to ensure that all moving parts continue to operate in harmony, for, while the race to October 2016 is a sprint, the sustainability of the Islamic economy is a marathon.

Dubai has a track record of building huge projects from the ground up and the first-mover advantage. As global financial centres go, Dubai and Kuala Lumpur track each other closely on the Global Financial Centres Index

In Islamic finance, Dubai aims to be the global hub. The first step is to become leader for the issuance, listing and trading of sukuk understand the halal sector’s business models, while halal companies can sometimes lack business savvy. If Dubai is to lead an integrated Islamic economy, it will first of all be necessary to marry Islamic finance and the halal industries, with the priority being to develop new models to support the small and medium-sized enterprises in the halal sectors across the entire investment cycle.

But before the coupling can be achieved, each sector has issues that must be worked out. The most challenging of these is the question of halal certification and accreditation.

(the March 2014 release ranked them 29th and 35th respectively), but the World Bank’s Ease of Doing Business Index ranks Malaysia 6th and the UAE 23rd.

The general mood of the professionals in the global Islamic economy is one of excitement and support for Dubai’s initiatives. One gets the feeling that the Muslim world genuinely wants Dubai to succeed, for if it does, the global capital of the Islamic economy could well be the tide that lifts all boats.

UNITED ARAB EMIRATES – GROWTH OF A NATION 65

KARIM SAHIB/GETTY IMAGES

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 66

PROSPECTS AND PARTNERSHIPS

UAE Vision 2021: towards the golden jubilee As the United Arab Emirates approaches its 50th anniversary, the country’s leaders have mapped out a vision for safeguarding its prosperity, security, stability and way of life

Emirati men holding falcons: Vision 2021 seeks to promote an ambitious and confident nation with strong links to its heritage

DESPITE BEING A RELATIVELY YOUNG country, having unified 42 years ago, the United Arab Emirates has evolved at a phenomenal speed, driven by its infinite ambition and visionary leadership.

In 2010, His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE, and ruler of Dubai, announced UAE Vision 2021, which calls for the country to take its place among the leading economies of the world.

Introducing the vision, Sheikh Mohammed said: “We are determined to respond proactively to all challenges in a way that will bequeath to future generations a legacy worthy of the pioneers who founded our great nation.”

Vision 2021, in anticipation of the 50th anniversary of the UAE, calls for a shift to a more balanced and diversified economy, and is built around four key pillars: an ambitious and confident nation grounded in its heritage, a strong union bonded by a common destiny, a competitive economy driven by knowledgeable and innovative Emiratis, and a nurturing and sustainable environment for quality living.

“The state is fully committed to providing a general environment that encourages entrepreneurship, innovation and creativity in order to realise the growth and determination of the people of the UAE,” His Excellency Sheikh Nahyan bin Mubarak Al Nahyan, the minister of culture, youth and community development, recently said at the Abu Dhabi Entrepreneurship Forum.

Encouraging family cohesiveness and reversing the rising divorce rate comes under the Vision’s first theme, as does the empowerment of women in all spheres. The latter in particular has seen tangible results. In 2013, in the government sector alone, women accounted for more than 65 per cent of the workforce.

Uncovering hidden talents Efforts are already set in motion to empower Emiratis, through initiatives such as the UAE National Games, scheduled to begin on 28 January 2015. The 10-day event was mandated by the Crown Prince of Abu Dhabi,

UNITED ARAB EMIRATES – GROWTH OF A NATION 67

His Highness Sheikh Mohammed bin Zayed Al Nahyan, to promote loyalty, patriotism, creativity and innovation among UAE nationals – ultimately improving their chances of employment by building their characters in preparation for the games and bringing out their best during the event.

While some of the games will be based on impulse, some will be based on discipline, and others will rely on team effort. Project marathons, for example, will run all day on a single topic between four teams, who can choose to design an abaya (a traditional women’s black robe), test their skills as artists or architects, create a logo or showcase their expertise in cars.

While these intensive competitions have been purposefully designed to help develop team-building skills, other games will focus on individual talents and abilities.

The objective is to increase confidence and self-esteem among Emiratis, uncover hidden talents, bring out leadership skills, and encourage entrepreneurship, in line with Vision 2021. “At an individual level,” the UAE National Charter 2021 states, “we will promote national champions in every domain, from sports to science and culture: every Emirati should aspire to become a champion in his field.”

Traditional games are a core component of the event, fulfilling the objective of maintaining a living link with the past and celebrating cultural anchors. Games such as Al Boom, in which boys build wooden boats and then compete against each other in the sea, and Al Damath, a traditional form of chess, will enable older generations to relive childhood memories with their children.

“Dialogue among children, parents and grandparents must remain strong to ensure that Emirati identity

KAMRAN JEBREILI/PA IMAGES

PROSPECTS AND PARTNERSHIPS

Technicians in a TV studio at the twofour54 media complex in Abu Dhabi, which aims to help launch at least 80 media start-ups by 2018 in partnership with incubator Flat6Labs

The Khalifa Fund has financed 582 projects with investments exceeding AED900 million thrives and flourishes through the passing of traditions from generation to generation… Our nation will celebrate its wealth of heritage and its deep-rooted ancestry,” says the Vision 2021 statement.

The spirit of entrepreneurship The UAE has come to the conclusion that the shift to a knowledge-based economy can only be accomplished within an entrepreneurial environment that harnesses the talent and creativity of Emiratis, and for this, a new class of entrepreneur is being supported with the help of practice programmes such as start-up incubators.

In fact, the UAE’s existing entrepreneurial ecosystem enjoys the support of approximately 40 entities. These include educational, governmental and private entities as well as those targeting specific sectors. These entities, such as Abu Dhabi Chamber, Dubai Chamber, Khalifa Fund for

Enterprise Development, Dubai SME, twofour 54, and Mubadala, to name a few, are all involved in promoting entrepreneurship throughout the country.

In Abu Dhabi, for instance, the government-backed Khalifa Fund has financed 582 projects with investments exceeding AED900 million ($245 million) since its inception in 2007. With capital of AED1 billion, the fund recently rolled out the Kitchen Incubator to support food-related businesses, caterers, restaurants and bakeries. The initiative has attracted 11 nationals in the first instance.

Another incubator, Flat6Labs, launched in Abu Dhabi in March 2014 in partnership with twofour54, the commercial arm of Abu Dhabi’s Media Zone Authority, aims to help launch at least 80 companies in the next four years, with a particular focus on digital content, e-commerce, citizen journalism, media and video production.

Three new laws are now being finalised in the UAE to support small and medium-sized enterprises: the Companies Law, the Bankruptcy Law and the SME Development Law. The SME Development Law in particular will ensure increased government support to SMEs, with one provision requiring government institutions to allocate a minimum of 10 per cent of their procurement to SMEs. The law will also require those companies in which the government holds at least 25 per cent equity to award a minimum of five per cent of their contracts to SMEs.

World-class infrastructure Already declared as the world’s longest fully automated metro network with a route length of 75km, Dubai Metro is now undergoing a three-phased expansion that will extend it to 110km by 2020. “Dubai Metro brought a revolution in the public transport sector not only in Dubai, but across the GCC [Gulf Cooperation Council],” said Abullah Yousuf Al Ali, acting CEO of the Roads and Transport Authority’s Rail Agency, at the Middle East Rail 2014 exhibition. “In Dubai, it has played an important role in changing the public

UNITED ARAB EMIRATES – GROWTH OF A NATION 68

PROSPECTS AND PARTNERSHIPS

WAEL HAMDAN/ALAMY

perspective about public transport, which is reflected in the increase in the share of public transport from just six per cent in 2006 to 13 per cent in 2013.”

At the same time, Etihad Rail, a 1,200km national railway network connecting the UAE’s key centres of trade and population, is forming an integral component of Vision 2021. By extending the country’s geographic markets, the project, which will eventually connect with the GCC network, is expected to bring direct economic benefits to the UAE through quicker freight and passenger transportation.

Although the UAE’s population is largely concentrated within Abu Dhabi and Dubai, many still live in outskirt and desert villages, especially Emiratis, who have inhabited these areas since long before urbanisation. Vision 2021 aims to extend the electricity network through enhanced grids, new power plants and desalination systems so that it covers all parts of the country.

The UAE National Charter 2021 says: “Utilities and services will be provided across the territory such that no region remains isolated or becomes marginalised.

World-class transport services and infrastructure will boost development and bridge communities.”

Airports are a fundamental part of the grand infrastructure plans, with Abu Dhabi expanding its international airport on a massive scale and Dubai World Central, an ‘aerotropolis’ around the new Al Maktoum International Airport, taking shape.

Meanwhile, encouraging Emiratis to maximise their potential by remaining in school and reaching higher-education levels is among the key objectives of

The 75km Dubai Metro, the longest fully automated network in the world, is to be extended to 110km by 2020

Vision 2021: “School dropout rates will fall, university enrolment will rise, and more Emiratis will climb higher up the ladder of learning into postgraduate education.”

Education has been provided as a free public service to all Emiratis from primary level through to higher-education stages since 1972, but a new law in 2012 raised compulsory school attendance to the age of 18.

The UAE has also worked tirelessly to form partnerships with world-class academic institutions such as INSEAD business school, New York University, the Sorbonne in Paris and the University of Wollongong, Australia, and has become home to research and development centres tackling a range of disciplines from aerospace to renewable energy.

Throughout Vision 2021, sustainability is regarded as a cornerstone of infrastructure development, not just in power generation, but also in construction, transport and other industries. Various measures have been implemented with the aim of reducing power and water consumption, and improving energy efficiency in buildings.

At present, the UAE, which hosts the International Renewable Energy Agency, is leading the GCC region in utility-scale solar installations, the latest of which was the 13-megawatt (MW) solar photovoltaic power plant, which was the first phase of the Mohammed bin Rashid Al Maktoum Solar Park. Abu Dhabi’s Regulatory Supervisory Board is also planning to develop a 500MW solar rooftop scheme, through which the emirate’s residents can generate clean energy and sell excess power back to the grid. Notably, Abu Dhabi has already built Shams 1, the region’s largest concentrated solar power plant.

Seven-year countdown With seven years left of Vision 2021, the government has stepped up efforts to ensure that its objectives are met and even surpassed. Earlier this year, Sheikh Mohammed set a national agenda with targets to be achieved in housing, education, health and government services, as well as the Emiratization of the private sector.

As an extension to the UAE Vision 2021, the newly announced agenda will see housing provided to Emiratis within a maximum period of two years. Many UAE national housing projects have been developed over the years, but, because of increasing demand, additional projects are being constructed, including Watani, a community that will be dedicated to Emiratis, and Al Raha Gardens, opposite the Al Raha Beach – the first development to be offered to UAE nationals in Abu Dhabi on an ownership basis.

“In the next seven years, the UAE will go through a great journey that will bring change and fast evolution to the country to achieve its objectives,” Sheikh Mohammed was cited as saying in The National newspaper. “Seven days each week we will work non-stop, and seven emirates will work together in their ‘one house’, and seven years will be filled with accomplishment leading to our Golden Jubilee”.

UNITED ARAB EMIRATES – GROWTH OF A NATION 69

PROSPECTS AND PARTNERSHIPS

Empowering women The United Arab Emirates is challenging perceptions of the role women play in society as they continue to be increasingly active in the country’s economic development at all levels

AT THE HEIGHT OF A 2006 POLITICAL firestorm in the United States following DP World’s bid to manage six American ports, an Arab woman became the voice of diplomacy. Her Excellency Sheikha Lubna bint Khalid Al Qasimi, a member of the royal family of the emirate of Sharjah and the then minister of economy and planning of the United Arab Emirates, stood out amid the melee and broke the stereotypes about Arab women and their role in a traditionally conservative society.

Sheikha Lubna is now the UAE’s minister of international cooperation and development.

While the DP World deal eventually collapsed, the UAE Government saw this as an opportunity to educate the international community about the country, its economy and, more importantly, its people. Sheikha Lubna, in an interview with CNN’s Christiane Amanpour in 2009, said that the DP World issue highlighted the need for the UAE to further promote itself and the work that it does in the global economy. “Having a woman speak in the US at that time [was a great selling point for the UAE],” she said.

Women’s participation in national development has been encouraged since the early days of the federation. The late His Highness Sheikh Zayed bin Sultan Al Nahyan, the UAE’s founding president, once said that “the role of women is no less than the role of men”. A proponent of female empowerment in the Arabian Gulf region, Sheikh Zayed ordered the establishment of schools and colleges for girls, as he believed education was an instrument for nurturing women’s potential. He also encouraged women to work and occupy high positions based on skills and qualifications.

Her Highness Sheikha Fatima bint Mubarak, chairwoman of the General Women’s Union and supreme chairwoman of the Family Development Foundation, highlighted Sheikh Zayed’s sentiments about the role of women in nation-building in an interview published in June 2014. “[He] was not only a strong supporter of women, but also their defender against injustice. He believed that women are half the society; that no country, which wants to build itself, can do so without the contribution of both halves,” said Sheikha Fatima, who is also president of the Supreme Council for Motherhood and Childhood.

The right of UAE women to take part in nation-building is enshrined in the UAE constitution, allowing them to

The UAE Cabinet has made it compulsory for companies and government agencies to have female board members

UNITED ARAB EMIRATES – GROWTH OF A NATION 70

CELIA PETERSON/GETTY IMAGES

PROSPECTS AND PARTNERSHIPS

UNITED ARAB EMIRATES – GROWTH OF A NATION 71

PROSPECTS AND PARTNERSHIPS

Perspective: Her Excellency Sheikha Dr Hind Al Qassimi comprising hundreds of companies and organisations across the UAE, GCC and the rest of the world. Unlike other UAE organisations, the Club has members from every sector, including male members as ‘Friends of BPW’. The Club can be reached at info@bpwme.com.

As a businesswoman by chairing BPW Middle East Company, which bridges investors and investments globally, Her Excellency underscored the vital role the UAE Government has played in creating an environment conducive to business creation for female entrepreneurs. “There have been many decisions taken by the UAE leaders in opening the way for women to occupy important positions [in the government]. Their trust and faith in women, [working] alongside men, [helped] achieve economic integration in the UAE,” Her Excellency said.

Her Excellency, who has spoken about women’s empowerment at various events around the world, added that the private and public sectors have worked side by side to maximise the potential of women in driving the economy.

Her Excellency, as early as the 1980s, has been involved in organisations that promote women’s participation in economic development. These organisations include the Sharjah Ladies Club, Sharjah Businesswomen Council and the Emirates Businesswomen Council, where Her Excellency was Chairwoman.

BPW MIDDLE EAST COMPANY

The United Nations Goodwill Ambassador for Women Support, HE Sheikha Dr Hind Al Qassimi, is one of the UAE’s veteran advocates for women’s empowerment.

Her Excellency believes in empowering women to invest in the future of the nation. Her Excellency also points out that sustainable development and the success of the UAE are based on the contribution of both women and men.

A member of the royal family of the emirate of Sharjah, Her Excellency currently chairs BPW (Business Professional Women) Emirates Club, a non-governmental organisation that promotes entrepreneurial-skills training, as well as creating opportunities for business owners and professionals to connect with each other and participate in activities that serve their business and career interests. Members benefit from the Club’s extensive network

welcomed in 2011 its first female Emirati co-pilot, who graduated from the airline’s cadet training programme.

Women have indeed carved a niche in the country’s business scene, thanks in part to the federal government paving the way for them to show their potential and explore opportunities. In December 2012, the UAE Cabinet – the country’s chief executive body – made it mandatory to have female board members in companies and government agencies in the UAE. The first of its kind in the Arab world, the ruling was hailed by many as a major step towards promoting gender equality and female empowerment.

Hazel Jackson, CEO of biz-group, a Dubai-based multi-million-dollar business strategy and corporate consultancy company, said that the UAE Government had embraced women in the workplace and continued to champion a diverse workforce.

“I believe businesswomen have helped shape the global perceptions of the UAE, and, when I am travelling and speaking, I like to alter the stereotype that the UAE does not welcome businesswomen,” she says. “Nothing is further from the truth and it’s a myth I love to break.”

Over the past 20 years, Jackson, a British expatriate, said she had witnessed how the UAE Government gradually created an enabling environment for businesses. “I set up biz-group in 1993 [with $700 capital] and things were a lot different then. There was very little transparency and

enjoy the same legal status, claim to titles, access to education and right to practise the profession of their choice as men. Today, more than 70 per cent of Emiratis graduating from federal higher-educational institutions are women, according to Gulf News.

In addition, women occupy an important role in the country’s decision-making process. According to a recent report published by the UAE Government, women in the diplomatic service and higher posts of government account for 30 per cent of the UAE’s civil service, including diplomatic postings abroad. The UAE Cabinet has four female ministers, while the Federal National Council, the UAE’s legislative body, has nine female members. The UAE’s current ambassador to the United Nations is also a woman.

Women represent 66 per cent of the government-sector workforce and a significant percentage of the national UAE labour force market, in fields as diverse as engineering, science, healthcare, media, computer technology, law, commerce, education, government and the oil industry.

Shaping global perception Women, both nationals and expatriates, are playing an active part in contributing to the UAE’s economic and social development. Their presence spans a wide spectrum of industries from public service and finance to real estate and aviation. Abu Dhabi-based Etihad Airways, for example,

UNITED ARAB EMIRATES – GROWTH OF A NATION 72

PROSPECTS AND PARTNERSHIPS

KATARINA PREMFORS/GETTY IMAGES

ARABIANEYE/GETTY IMAGES

Women make up a significant portion of the UAE workforce, working in fields as varied as healthcare, law and engineering Today, more than seven in 10 Emirati graduates are women

the process was painstakingly bureaucratic,” she says.

“We have certainly come a long way since then and a lot of this is attributed to the vision of the UAE Government and establishment of free zones, [which] really helped create a process where businesses can be established efficiently and in a professional manner.”

Demonstrating ability on a global stage, in November 2013 minister of state Reem Al Hashemi delivered the final presentation during Dubai’s winning bid for the World Expo 2020. Acknowledging the importance of the event for the UAE, prime minister Sheikh Mohammed bin Rashid Al Maktoum and 10 ministers from the federal cabinet joined her at the event in Paris. Al Hashemi was the managing director of the bid committee, leading the team successfully through five rounds of presentations.

and economic contribution.” As a result of ADBWC’s efforts, Fatima Al Jaber, chief operating officer of Al Jaber Group and the executive board chairwoman of ADBWC, said that the number of businesswomen in Abu Dhabi has steadily increased to more than 5,700 in 2013 in a press statement. She also underscored the important role businesswomen play in supporting the emirate’s overall economic activities.

Raja Al Gurg, managing director of the Easa Saleh Al Gurg Group and president of DBWC, wrote in a 2007 report – Women Business Owners in the UAE – that around 44 per cent of female-owned businesses in the UAE were small, and only two per cent were medium-sized. DBWC’s core mission, she added, focused on helping women grow their businesses from small to medium through a range of networking, mentoring and skills-building activities.

Most recently, DBWC partnered with MasterCard to launch Ro’Ya (Arabic for ‘vision’), a programme with a holistic approach towards helping female entrepreneurs.

The initiative, which started in January 2014, was designed not only to provide financial assistance to entrepreneurs looking to set up their own companies, but also to offer training to equip them with the necessary insights and skills to take their businesses to the next level. Ro’Ya addresses this through coaching and mentoring aimed at helping female entrepreneurs transition from an idea stage to setting up and running their businesses successfully.

“Ro’Ya will give women across the UAE a real opportunity to pursue their dreams while also enabling them to support the country’s economy, resulting in long-term benefits for them, their families, and their society,” says Michael Miebach, president, Middle East and Africa at MasterCard.

The programme’s training sessions cover a range of topics from learning about the fundamentals of business planning and creating a unique value proposition to hiring the right people and pitching a winning idea.

The Ro’Ya initiative helps female entrepreneurs transition from an idea stage to setting up and running their businesses successfully

Encouraging entrepreneurship The Dubai Business Women Council (DBWC) and the Abu Dhabi Businesswomen Council (ADBWC) have implemented programmes in order to encourage entrepreneurship among women. Their initiatives support the UAE’s plan to diversify the national economy by stimulating the private sector.

“There is an added value in providing businesswomen with entrepreneurial support groups, education or training, mentoring and funding initiatives,” says Jackson. “These would ultimately support their business development

As part of the Ro’Ya initiative, the DBWC and MasterCard will accept business concepts from female entrepreneurs, with the leading three winning cash prizes in November 2014 of $50,000, $30,000 and $20,000, respectively, towards the start-up costs, Al Gurg said in a statement released in April 2014. “Women in the UAE are already playing an increasingly important role in driving the economy, but there is still scope for female entrepreneurs to realise their full potential,” says Miebach.

UNITED ARAB EMIRATES – GROWTH OF A NATION 73

BANKING AND FINANCE

Banking on greater prosperity The United Arab Emirates is using lessons learnt from the past to fortify its financial institutions and diversify its fast-recovering economy

AS THE ECONOMY OF THE UNITED ARAB Emirates recovers, so do the profits of the federation’s banks. At the last count, both conventional and Islamic institutions were reporting solid increases in profits for the first three months of 2014. Indeed, most say that the rebound in business seen in 2013 shows every sign of continuing.

If so, this is good news for shareholders as well as for the rulers of the seven emirates that make up the UAE: Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Ajman, Umm Al Quwain and Fujairah. The helping hand lent to some of the UAE’s commercial giants when the financial crisis struck several years ago means that many of them are owned in part or directly by the state.

Yet, at the same time, care is being taken to ensure that the pace of growth is not too vigorous. The fact that property prices in Dubai have risen by 60 per cent or so over the past couple of years to levels now approaching those reached pre-crisis is proof, if it were needed, that the recovery has arrived. To policymakers, however, it is also evidence that they must be vigilant that banks do not lend too much and so risk inflating a fresh bubble.

Property prices showing signs of stabilising Indeed, the Central Bank of the UAE has been careful to introduce caps on mortgages and the concentration of loans, so that, in future, banks will not be overexposed to the property market and to the businesses tied to it.

The central bank has also stepped up its efforts to monitor the economy, partly by giving more resources to the Financial Stability Unit and partly by ensuring that there is a clear legal basis on which to act if required.

An encouraging sign, according to ratings agency Standard & Poor’s (S&P) is that, so far, there has been only a modest increase in UAE banks’ exposure to real estate.

Indeed, were property values to dip again, it would have only a limited effect on their balance sheets. The danger, of course, is that with more and more projects in the pipeline, the banks may be tempted to step up their lending again.

Yet, says S&P, property prices in Dubai and Abu Dhabi are already showing signs of stabilising, in part because of

The Gate Building in the financial district of Dubai.

Property prices in the emirate have risen dramatically in the past couple of years, feeding economic growth

UNITED ARAB EMIRATES – GROWTH OF A NATION 74

SYLVAIN SONNET/GETTY IMAGES

BANKING AND FINANCE

UNITED ARAB EMIRATES – GROWTH OF A NATION 75

www.nbad.com

United Arab Emirates Tel: +971 2 6358001, Oman Tel: +968 24761076, Bahrain Tel: +973 17560870, Kuwait Tel: +965 22904910, Egypt Tel: +20 2 37475360, Sudan Tel: +249 183 787203, Libya Tel: +218 21 3362283, Jordan Tel: +962 6 5002222, Lebanon Tel: +961 1 971021, China Tel: +86 021 60952388, Hong Kong Tel: +852 34134388, Malaysia Tel: +603 23303800,

2002658 Bank NBADofEmerging market Ad DPS 142x27.5 Final 02.indd 1 National Abu Dhabi_placed.indd

02/06/2014 16:59

Natio

Safest Bank in Emerging Markets & one of the world’s highest rated banks

Global Finance magazine ranked the National Bank of Abu Dhabi (NBAD) as the Safest Bank in Emerging Markets in 2013, the Safest Bank in the Middle East, and one of the 50 Safest Banks in the world since 2009.

These significant recognitions are the result of continuous efforts towards excellence.

Winner of Sheikh Khalifa Excellence Award - Diamond Category 2013 United Kingdom Tel: +44 207 3933600, Switzerland Tel: +41 22 7075000, France Tel: +33 1 53230280, Channel Islands Tel: +44 1534 609000, United States of America Tel: +1 202 8427900, Brazil Tel: +55 11 3443 7246

16:59

National Bank of Abu Dhabi_placed.indd 2

6/1/14 10:10 AM 02/06/2014 16:59

ies

BANKING AND FINANCE

Banking developments in the UAE, 2011-12 AED (billions) Development

2011

2012

Growth rate

Total assets

1,166.2

1,791.6

7.8 %

Total deposits

1,069.8

1,167.8

9.2 %

Total loans

1,071.0

1,099.1

2.6 %

100%

94.1 %

–

Ratio of loans/deposits

Source: Central Bank of the UAE

the increase in supply as new developments come to the market. This suggests that, for now at least, policymakers may be enjoying the best of both worlds: a vibrant property sector, which contributes to employment and so to the growth of the economy, and only a minimal risk of house prices over-inflating.

Indeed, as home to the largest collection of banking assets in the Middle East, financial institutions in the UAE have a responsibility that extends beyond their home turf. With a growing number of banks in the federation considering opportunities outside their domestic markets, particularly in sub-Saharan Africa, managers and regulators alike must be especially prudent when making decisions.

At the same time, as European banks step back from foreign parts of the world so as to rebuild balance sheets in order to meet the stiffer requirements of Basel III or to concentrate on other markets, there will be opportunities for UAE banks to expand at home too – for example, the offer by Abu Dhabi Islamic Bank to buy the UAE retail businesses of British lender Barclays. The UAE’s central bank has approved a deal that will see Barclays sell the offshoots for the equivalent of $177 million.

The Dubai Financial Market plans to merge with the Abu Dhabi Securities Exchange

KEVPIX/ALAMY

After a modest rise in 2012, loans and advances across the UAE grew more strongly in 2013 As it is, the UAE’s banking industry is split more or less equally between domestic and foreign lenders, with just over 50 institutions in all. Having experienced a modest rise in 2012, loans and advances across the federation grew more strongly in 2013 and have continued to do so in 2014 as well. Provisions by local banks for non-performing loans rose only marginally in 2012 – a sign that the economy was building momentum.

With the UAE being the world’s eighth-largest producer of oil, global demand for energy has a big impact on the country's economy, particularly that of Abu Dhabi, the main

producer. With high oil prices and a welcome resurgence in tourism and trade, overall, the country’s gross domestic product grew by 1.3 per cent in 2011. The rate rose to 4.2 per cent in 2012, thanks partly to a pick-up in the demand for oil, and by even more the following year.

As a big exporter of merchandise trade, the UAE already capitalises on its banks and other financial institutions with the skills to support it. And such needs are likely to increase in future. Under Abu Dhabi’s Economic Vision 2030, the government wants to attract foreign capital to develop everything from industry to transport, petrochemicals, renewable energy and telecommunications, as well as services for oil and gas. At a federal level, the accent is on research and development, technology and other areas requiring knowledge and expertise.

Not that the UAE has any trouble attracting foreign capital. The federation already accounts for 48 per cent of foreign direct investment into the Gulf Cooperation Council and for a sizeable proportion of the world’s direct capital. The trend is likely to continue as capital from elsewhere in the Arab world seeks a safe haven. Indeed, a combination of increased public spending by Abu Dhabi and a strong performance by businesses in Dubai outside hydrocarbons, says the United Nations Conference on Trade and Development, has helped to rebuild an appetite abroad for foreign direct investment in the UAE.

UNITED ARAB EMIRATES – GROWTH OF A NATION 78

MARWAN NAAMANI/GETTY IMAGES

BANKING AND FINANCE

In marshalling these resources, the UAE has more than just an extensive banking system and the attendant skills; the federation has liquid capital markets too. The two biggest are the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange. If the pair merge, as has been agreed in principle, the result will be an even bigger market that could attract not just local heavyweights but smaller companies and those from outside the UAE too.

Visitors to the Cityscape Global show look at a model for a construction project in Dubai

An attractive geographical position Giving the federation an international dimension is NASDAQ Dubai, which trades in equities, derivatives, gold securities, real estate investment trusts, Islamic securities and debt, as well as exchange-traded funds and structured products. The market’s attraction for many is its geography, situated as it is between Western Europe and East Asia. Borse Dubai is the holding company for NASDAQ Dubai in addition to the DFM. Since commodities, including oil, are important not just within the UAE but to the wider Middle East and much of Asia, the Dubai Mercantile Exchange has become a centre for such trade. The exchange developed what is known as the DME Oman Crude Oil Futures Contract, a pricing benchmark for crude oil in Asia. It is traded on the CME’s electronic platform and cleared through the CME too.

Dubai Gold and Commodities Exchange (DGCX) was established in 2005 by the Dubai Multi Commodities Centre, Financial Technologies (India) and the Multi Commodity Exchange of India. As the region’s first exchange to trade in commodity derivatives, it has become the leading such platform in the Middle East.

The DGCX offers contracts in metals energy. Because of its location between East and West, the exchange extends its trading hours, particularly for those in Asia.

It is one thing to offer a market in equities, or even a market in commodities or derivatives based on them. Yet, as many countries have discovered, it is altogether more difficult to develop liquid markets in debt. The federal government as well as the Abu Dhabi Government are considering the issuance of domestic bonds.

So, what of Dubai’s future? Having borrowed from Abu Dhabi at the height of the financial crisis in 2009, Dubai has now succeeded in rolling over $20 billion worth of debt that was due later this year. The deal covers $10 billion lent by the government in Abu Dhabi through two state-owned banks, as well as a similar amount in five-year bonds issued by Dubai to the UAE’s central bank.

The total is to be rolled over for a further five years at an annual interest rate of one per cent.

A foundation for steady growth Dubai’s ratio of debt to gross domestic product has fallen a long way from its peak of 48 per cent in 2009. Yet, says the International Monetary Fund (IMF), the emirate still has some way to go. If, as expected, Dubai balances its budget this year, or at least comes close to doing so, it will be well on the road to securing its future. The next step will be to ensure that a collection of government-related entities restructure a further chunk of debt coming due, according to the IMF, between this year and 2017.

For residents of the UAE and visitors, there can be little doubt that 2014 feels very different to 2009. Today, leaders and entrepreneurs alike are determined that, over the next few years, not only will the economy continue to strengthen, but it will also diversify further. This, in turn, will provide a foundation for a steady growth based on energy, industry, knowledge and a host of other attributes that together make up a successful economy.

UNITED ARAB EMIRATES – GROWTH OF A NATION 79

ADVERTISEMENT

Dubai Islamic Bank:

A leader of the global Islamic finance industry Nearly 40 years after it pioneered the concept, Dubai Islamic Bank continues to set the benchmark for the global Islamic finance industry.

Dubai Islamic Bank (DIB) created history in 1975 when a decree issued by the late Ruler of Dubai, His Highness Sheikh Rashid bin Saeed Al Maktoum, established the first modern commercial Islamic bank in the world. Sheikh Rashid had been approached in the preceding years by Haj Saeed Ahmed Lootah, a leading local businessman and a man of vision, with the idea that a bank should be established in the Emirate that would operate according to the tenets of Islam.

Before this, customers had no choice but to use conventional banks for all their financial requirements. By incorporating Sharia principles into all its operations, DIB pioneered an alternative based on fairness and transparency. Nearly 40 years later, DIB has established itself as the undisputed leader in its field, setting the standards for others to follow, as the concept of Islamic banking has gathered momentum in the Arab world and internationally.

Across the world, DIB is recognised as a leader in the creation of high-quality, flexible and accessible Islamic banking products. DIB’s products and services are not only Sharia-compliant, but also competitive with conventional products offered by other banks. Today, DIB services retail, commercial, corporate and institutional clients through dedicated divisions staffed by the industry’s best professionals.

With its strong emphasis on providing unparalleled customer experience, DIB consistently upgrades its services to meet the evolving needs of its customers respective to their age, gender and their financial profile. With its Johara ladies banking and Wajaha wealth management divisions, in addition to standalone

Al Islami Private Banking branches, the bank possesses specialised units for women and high-net-worth individuals respectively. The bank recently launched Shaatir Savings Account, a unique account just for children, which will help them understand banking from a young age and develop the mindset to plan for their future Time and again, DIB has shown itself to be a bank of firsts. The bank launched Emirates REIT, Dubai’s first real estate investment trust, and was an arranger in the first UAE Islamic bank aircraft financing deal for the purchase of an A340-500 by Emirates Airline. Today, DIB stands as the largest Islamic bank in the country, with its footprint across all business segments, including consumer, wholesale, debt capital markets and investment banking.

Through its commercial and corporate banking operations, DIB is proud to support the ongoing economic development of the UAE by providing financing in key sectors such as aviation, real estate, shipping, tourism, hospitality, and infrastructure.

As part of its strategy to expand in select niche Islamic markets in the Middle East, Africa and Asia, in 2006, DIB established DIB Pakistan Ltd, a 100 per cent owned subsidiary, to offer Islamic banking services in Pakistan. DIB then acquired a 20.8 per cent stake in Jordan Dubai Islamic Bank in 2009. Illustrating its appetite for further growth and the success of its franchise, DIB is also looking to expand into East Africa, Oman, Qatar and Saudi Arabia to name a few.

Additionally, DIB has incorporated several subsidiaries, including Deyaar Development in 2002, DIB Capital Limited

in 2006, and Dar Al Sharia Legal & Financial Consultancy LLC in 2008. In 2013, the bank enhanced its stake in Tamweel, the largest home finance provider in the UAE, merging the operations with the bank and realising significant financial and operational synergies.

The largest Islamic bank in the UAE Through its focus on innovation and excellence, DIB has gone from pioneer of Islamic finance to attaining the status of the UAE’s largest Islamic bank with a customer base of over 1.4 million and a wide network of more than 86 branches located conveniently across the country.

As DIB’s branch network has expanded, so too have the number of alternative banking channels available to customers, such as internet banking, telephone banking and e-branches.

DIB offers online and mobile telephone banking facilities, giving customers greater flexibility to manage their relationship with the bank by offering a range of banking and financial services.

DIB has been involved in several benchmark Islamic capital market transactions. In March 2013, DIB successfully raised a $1 billion Tier 1 Capital-eligible issuance, which was extremely well received by investors across the globe, evidenced by the fact that it was oversubscribed 14 times. Earlier, the bank launched its own highly successful $500 million five-year Sukuk in May 2012, which was oversubscribed more than four times, a notable achievement in light of volatile market conditions prevalent at the time of issuance.

ADVERTISEMENT

DIB has also participated in a number of key transactions, having arranged a $750 million sukuk for the Government of Dubai and a $1 billion sukuk for the Dubai Electricity and Water Department.

In addition, the bank has been able to leverage its institutional relationships to lead a $1.75 billion equivalent dual currency syndication for Dubai Duty Free, and another worth $2.55 billion for the Investment Corporation of Dubai.

A leader in Islamic finance and the wider community Alongside its accomplishments as a commercial organisation, DIB has always taken its responsibilities to society seriously. DIB understands that it has a wider role to play in society, given its charter as a major global Sharia-Compliant organisation. The bank supports the communities in which it operates through the DIB Foundation, a non-profit social, humanitarian and charitable organisation which distributes millions of dirhams to good causes at home and abroad each year.

DIB Foundation is working tirelessly to support thousands of disadvantaged people in the UAE and across the world, helping families with educational fees, rent and medical fees, as well as supplying medical and X-ray equipment to hospitals and health centres. In 2013, The Foundation was active in supporting appeal campaigns inside the UAE and overseas, distributing approximately AED 175 million including Zakat.

Worldwide recognition For its contribution to both the banking industry and the wider community, DIB has earned the respect of its peers around the

world. The bank’s leading position has been reaffirmed by the more than 125 local, regional and international accolades that it has won since 2008. DIB has won awards across diversified areas, including retail, corporate and investment banking, as well as CSR and consultancy services. In addition to the ‘Best Islamic Bank 2013’ at the Global Islamic Finance Awards, recent recognition includes being named ‘Best Islamic Bank and Best Investment Bank’ at the Banker Middle East Industry Awards, ‘Best Sukuk House’ at the EMEA Finance Middle East Banking Awards, as well as being chosen as the ‘Best Corporate Bank’ and winning the awards for ‘Best Credit Card’ and ‘Best Banking CSR Initiative’ at the Islamic Business & Finance Awards. Dubai Islamic Bank has also been declared the winner of the ‘Best Islamic Bank, UAE – 2014’ by World Finance - Islamic Finance Awards.

Focused on the future While DIB is an institution that is deeply proud of its achievements, its success has always been built on looking towards the future. The consensus among most industry experts is that the global Islamic finance industry will expand significantly over the coming years. As such, DIB is strongly positioned to benefit from the increasing demand for Islamic financial services locally, regionally and globally.

While the retail segment will continue to be the key driver in the short to medium term, the resurgence of Sukuk as a preferred mode of raising funds and further innovation in working capital finance structures and liquidity management offerings across wholesale segment represent another area that will boost this already fast-growing sector.

The recent announcement by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai, sent a clear message that Dubai is intent on becoming the global capital of the Islamic economy. Dubai Islamic Bank, with its vision to be the most progressive Islamic financial institution in the world, looks forward to lead and contribute in the success of this new initiative.

Since 1975, the landscape of the UAE has changed beyond recognition.

New roads and bridges have sprung up everywhere, as have awe-inspiring hotels, shopping malls and real estate developments, including, of course, the world’s tallest tower. One of the few constants amidst this sea of change has been Dubai Islamic Bank.

Nearly four decades after its creation, DIB can rightly take credit for pioneering the concepts of Islamic banking and finance.

Moreover, by successfully combining traditional Islamic values with the technology and innovation that characterise the best of modern banking, DIB today proudly competes on an equal basis with the world’s largest conventional banks.

For further information please visit www.dib.ae

BANKING AND FINANCE

Sharia: growing at a rapid pace The spread of Islamic law across the Gulf and beyond is giving rise to growing pains that must be resolved

WHETHER BUYING A HOUSE OR A CAR, taking out a personal loan, borrowing for a small business, seeking to raise money by selling bonds issued by their company, or searching for trade finance or simply investing assets for their retirement, more and more people in business or at home are today likely to find what they need from an Islamic bank.

Especially if they are in the Middle East or Asia. Indeed, institutions in such places that comply with Sharia, or

Islamic law, are not only likely to expand more quickly than their conventional counterparts but can also look forward to a sustained period of growth.

Take the countries of the Gulf Cooperation Council (GCC) which includes the United Arab Emirates. Figures compiled by ratings agency Standard & Poor’s show that Islamic banks in the region saw their assets grow annually at a compound average rate (CAGR) of 17.4 per cent during the four years to the end of 2012. That is more than twice

UNITED ARAB EMIRATES – GROWTH OF A NATION 82

GALLO IMAGES/ALAMY

BANKING AND FINANCE

the rate of conventional institutions within the same countries. Net lending and the amount of customer deposits accepted by Islamic institutions also rose at a healthy rate during the same period, and such buoyant trading is likely to continue for some years to come.

Because they rely on earnings from property and other parts of the real economy, Islamic banks are more likely to suffer from non-performing loans than their conventional counterparts if these areas are hit, as they were, by the

financial crisis a few years ago. Since banks that comply with Sharia depend more than their non-Islamic rivals on liabilities that bear no interest, which is forbidden under Sharia, the former may also be affected if such sources of income are squeezed, as they were, by the economic slowdown that followed the crisis.

Yet, by and large, the countries of the GCC have one of the most active markets for Islamic finance anywhere in the world, and the UAE is no exception. A combination

UNITED ARAB EMIRATES – GROWTH OF A NATION 83

ADVERTISEMENT

Islamic Finance: expanding beyond traditional markets

By Shamzani Hussain, Head of Islamic Banking, Wholesale Banking Group, FGB. Islamic finance has seen particularly strong growth beyond its traditional market over the last eight to 10 years. The Islamic finance industry is expected to reach $2 trillion by the end of 2014. The total value of Shariah-compliant assets has grown by 150 per cent since 2006, and the Sukuk market is set to exceed $60 billion of total issuances in 2014.

The continuous flow of petrodollars and increased awareness of Islamic finance has more than 500 Islamic financial institutions globally and Islamic banks taking a quarter of market share in traditional markets such as the Kindgom of Saudi Arabia, UAE, Qatar, Bahrain, Kuwait, and Malaysia.

Government recently announced plans to issue its first sovereign Sukuk in 2014.

The Monetary Authority of Singapore (MAS) has continuously refined its regulations to facilitate the growth of Islamic finance. The MAS also joined the Islamic Financial Services Board to contribute in areas such as supervisory review and capital adequacy. In 2009, MAS issued a landmark Sukuk facility to help meet regulatory and liquidity requirements for Singapore-based financial institutions.

The introduction of the law governing tax treatment for Islamic securities in 2013 has paved the way for the development of the Sukuk market in Hong Kong. The city is now encouraging more local issuances of Sukuk to allow issuers to diversify and open up alternative funding sources from markets such as China, Asia and the Gulf Cooperation Council (GCC). The Hong Kong government has recently announced plans to issue up to $1 billion Sukuk in 2014.

A number of factors contributed towards the success of the UK, Singapore and Hong Kong as alternative Islamic financial hubs. Firstly, the mature financial market infrastructure, high standards of legal services and the introduction of Shariah governance standards. Secondly, an increasing number of multinational corporations have started utilising Islamic finance facilities to conduct their cross-border activities. These corporations are able to exploit the capacity of these hubs to diversify their funding and capital raising sources via Shariah-compliant means. Lastly, there has been an increase in the number of financial Institutions offering Islamic financial products as a

The UAE is well primed to become the leader of the global Islamic finance industry While Islamic finance has grown rapidly within the confines of traditional markets, it is interesting to note the continuing trend of expansion into non-traditional markets. Among the non-traditional Islamic markets, the United Kingdom (UK), Singapore and Hong Kong have demonstrated significant achievements in positioning their respective markets as alternative Islamic Financial hubs.

In the UK, a raft of initiatives has been launched to support the growth of Islamic finance. The UK Islamic Finance Secretariat and a ministerial-led Islamic Finance Task Force were set up to promote the UK as an Islamic financial center. Islamic finance was used in key projects such as The Shard of Glass, the Olympic Village and the redevelopments of the Chelsea Barracks and the Battersea Power Station. The UK

result of them reviewing their client propositions across the value chain.

Today, Islamic finance has broadened its appeal well beyond the confines of Muslim conservatives and traditional Islamic markets. The strong economic growth in the GCC and other Islamic markets has contributed towards the increase in trade activities with the rest of the world. Given the strategic positioning of the UAE within the Islamic Economy, the country is able to play an important role to connect trade and capital flows across GCC, Europe and Asia.

A financial hub with global reach Further evidence of UAE’s ambition to position itself as the capital of the global Islamic economy is demonstrated by the activities of UAE banks such as FGB, which is expanding its global footprint.

Headquartered in Abu Dhabi, FGB operates out of seven international locations, which include the UK, Singapore and Hong Kong.

This strong international reach allows FGB to offer the full suite of Islamic products across all industries and geographies.

Aided by the vision of H.E. Sheikh Mohammed bin Rashid Al Maktoum (Vice President of UAE and Ruler of Dubai), the UAE is well primed to become the leader of the global Islamic finance industry.

Corporate Affairs P.O. Box 6316, Abu Dhabi United Arab Emirates www.fgb.ae

Be free. Be first.

With great success comes great responsibility. When you are at a point where the financial possibilities are boundless, robust planning is essential to protect and grow your wealth. At FGB, our wealth management team will share their expertise to chart out an investment strategy to help achieve your goals with customised solutions, supported by a dedicated relationship manager.

www.fgb.ae

Growth of a Nation_21x27.5.indd 1

6/11/14 4:16 PM

of state encouragement and active interest among its residents has meant that banking that complies with Sharia has a healthy following throughout the emirates – one that is likely to grow as the economy recovers from the setbacks of the past few years.

Indeed, the governments of the individual emirates have gone out of their way to foster an industry that many believe has potential – so much so that a number of conventional banks, such as Sharjah Islamic Bank (originally the National Bank of Sharjah), have opted in recent years to become Islamic institutions. As is also the case elsewhere in the GCC, the governments of the various states within the UAE have also held stakes in some of their banks. This helped to nurture the banks as they grew during a turbulent time.

According to Standard & Poor’s, Islamic banks in the UAE grew by a CAGR of 14.5 per cent during the four years to the end of 2012. The fact that banks in countries such as Saudi Arabia recorded stronger growth is a consequence of the economies of the UAE being more open and therefore more vulnerable to risks imported from abroad.

Unsurprisingly, Islamic banks rely more on customers’ deposits than their conventional rivals do.

As much as 70 per cent of Islamic banks’ total assets come from such deposits, according to research by Standard & Poor’s. Indeed, Islamic banks in the Gulf traditionally employ more of their own capital in funding their liabilities than conventional banks do.

While Islamic finance as a whole has continued to grow apace – in the latest World Islamic Banking Competitiveness Report, professional services firm EY puts the industry’s banking assets worldwide at $1.72 trillion in 2013, up from $1.54 trillion the year before – there is now talk of a need not just for standardisation but also for more emphasis on quality as well as growth. And nowhere is this need more apparent than in the ebullient economies of the UAE.

Opening up ‘Islamic windows’ Having established itself as a series of self-sufficient pockets in countries with a Muslim majority or a sizeable Muslim minority, the industry is fast becoming global.

At the last count, says EY, Islamic banks served no fewer than 38 million customers worldwide. This has encouraged the industry to reach out and expand. Take, for example, Dubai Islamic Bank, the emirate’s largest such institution.

With an established base at home, the bank says it now wants to expand into other countries, such as Indonesia, Kenya and elsewhere in Africa.

Furthermore, established lenders have either opened up so-called ‘Islamic windows’ – simply a facility within a conventional bank via which customers can conduct business using only Sharia-compatible instruments – or taken control of Islamic offshoots that nonetheless remain independent. For example, First Gulf Bank (FGB),

JUMANA EL HELOUEH/CORBIS IMAGES

BANKING AND FINANCE

A man walks past the Sheikh Zayed Road branch of Sharjah Islamic Bank in Dubai

one of the UAE’s largest conventional banks, acquired full control of Aseel Islamic Finance in 2013. Why? Because, says FGB, Islamic finance is an important and growing part of banking in the region. Acquisitions work the other way, too, as in the case of Abu Dhabi Islamic Bank’s purchase of part of Barclays’ retail operation in the UAE.

International standards of conduct With this growth, however, comes a realisation that if it is to compete across markets and jurisdictions with conventional banks, Islamic finance must review its structure and how it operates. Many argue that, if they are to succeed in the next phase of their development, Islamic banks and other such institutions must comply not only with the principles of Sharia but with international standards of conduct, governance and discipline.

There is talk of a need for standardisation and for more emphasis on quality as well as growth Nowhere is this more apparent than in the way in which the industry is supervised. The question now, say observers, is whether the standard of regulation as well as the products and services on offer are keeping pace with the industry’s development. What many would like to see are tighter prudential controls, so that consumers and investors alike have confidence that the industry follows the standards to which it aspires.

Such concerns are over and above the technical issues that regulatory bodies are already addressing.

As well as differences between jurisdictions in how they interpret Sharia law, such issues include how best

UNITED ARAB EMIRATES – GROWTH OF A NATION 86

BANKING AND FINANCE

should be linked to the real economy. This means delivering real benefits to end users, be they consumers, businesses or even governments. It also means financing hospitals, affordable housing and the other requirements of a civilised society. Also on the list is takaful, or Islamic insurance, so that customers and businesses alike can offset the risks they encounter each and every day.

Takaful, which resembles the mutual model found in conventional insurance, has mushroomed of late. During the past decade alone, the industry has grown more than 10 times in some parts of the Gulf. So much so, in fact, that the GCC market now accounts for 40 per cent of total contributions paid to takaful operators. Yet the industry still needs to address concerns, particularly over its governance and participants’ rights.

Also of concern to many within the industry is how to develop an Islamic version of venture capital.

With small- and medium-sized firms sometimes struggling to find finance despite having promising ideas or providing products or services, the industry needs to come up with answers. To help it do this, the Dubai Islamic Economy Development Centre intends, among other things, to carry out research, commission studies and weigh up the evidence.

MICHELE BURGESS/ALAMY

Abu Dhabi Islamic Bank is to acquire part of Barclays’ retail operation in UAE

Johara Ladies, a branch of the Emirates Islamic Bank in Dubai that is for the exclusive use of women

MATILDE GATTONI/ARABIANEYE/CORBIS

to develop the market for sukuk, or Islamic bonds; the best way for banks and others within the industry to use collateral as a tool to boost their liquidity; and how to hedge their risks in a way that complies with Sharia.

Indeed, Dr Zeti Akhtar Aziz, governor of Bank Negara Malaysia, the country’s central bank, touched on these issues in her speech in Jeddah last year at an event organised by the Islamic Development Bank. Warning of “unintended consequences”, Dr Aziz said that Islamic banks continued to be limited in their ability to tap a pool of Sharia-compliant assets. There are insufficient instruments in which to invest; and even when such instruments do exist, they are often illiquid, she said.

A key concern of many within the industry, of course, is that, in complying with the tenets of Sharia, Islamic finance

Centre for resolving disputes The centre might also encourage more students to enter the industry. What if Islamic finance were to make another leap, only to find that there were too few qualified people to support it? Tahseen Consulting, an adviser, reckons that as much as $124 billion in new money could flow into the UAE’s Islamic banks and other such institutions next year. If that were to happen, it says, the industry would need to fill nearly 8,000 extra jobs.

It is a sign perhaps that an industry has reached a certain standing in the world economy when the number of disputes between its participants begins to escalate.

Islamic finance, it seems, has reached that point. A decade ago, say bankers in the Gulf, there were no disputes to speak of. Five years ago, there were a few. Now, the number is significant and escalating. Establishing a greater degree of standardisation within the industry would help, of course.

Regulatory benchmarks that are clearly signposted and defined would be a first step, as perhaps would be an international centre for resolving disputes. The Accounting and Auditing Organisation for Islamic Financial Institutions has issued a wealth of standards on accounting, auditing, governance, ethics and Sharia. Yet, say critics, many simply classify rather than rule on such issues. Should the industry establish a central Sharia board? Doing so would boost the UAE’s standing as an Islamic banking centre but, given the geographical diversity of Islamic finance and the fragmented way in which the industry has grown, that would require a greater degree of consensus than exists at present.

UNITED ARAB EMIRATES – GROWTH OF A NATION 87

BANKING AND FINANCE

Dubai takes the lead in sukuk With the emirate promoting its status as an international hub for Islamic finance, Dubai Financial Market has now issued new guidelines on the structuring of Islamic bonds

IT IS NOT SURPRISING THAT THE UNITED Arab Emirates signed a pact last year with Malaysia aimed at fostering closer economic ties between the two states. As the dominant issuer of sukuk, or Islamic bonds, the government in Kuala Lumpur carries weight in the world of Islamic finance, and as shareholders in the International Islamic Liquidity Management Corporation – a body tasked with, among other things, boosting the number of sukuk in issue worldwide – the two countries’ central banks are used to working together.

In fact, the pact and other such efforts have already paid off. Since the Government of Dubai announced the formation last year of its Global Sukuk Centre, part of a strategy to develop the emirate as an international hub for Islamic finance, it has been a very busy time.

In April, the Government of Dubai made an offer of sukuk worth $750 million, which was one of the landmark events. The issue will be traded over the counter and carry a tenor of 15 years – twice as long as most in the market. The government hopes not only to push back the date for repayment, but, equally importantly, to create a yield curve stretching out for more than a decade. This, it is hoped, will encourage investors to buy the bonds as well as attracting other borrowers, thus boosting liquidity at the long end of the market for sukuk. Among those expected to benefit from the administration’s example are companies owned by the state. Having restructured their debts in 2009,many will now want to tap the market for fresh money.

The Dubai Government’s issue of Islamic bonds was not a purely domestic or even regional affair; some 27 per cent of the sukuk sold in April was to investors from Europe (17 per cent of them from the United Kingdom). And the fact that the bonds were priced at the lower end of the guidance also suggests that investors are regaining confidence in the ability of the Government of Dubai to direct its finances.

Also welcome to those promoting the emirate’s role as a centre for Islamic finance was an announcement by the Islamic Development Bank (IDB), an international body based in Jeddah. It said last year that it intended to list sukuk on NASDAQ Dubai, an international exchange in the

The Dubai Financial Market has issued new guidance on the structuring of sukuk

UNITED ARAB EMIRATES – GROWTH OF A NATION 88

STR/REUTERS/CORBIS

BANKING AND FINANCE

UNITED ARAB EMIRATES – GROWTH OF A NATION 89

BANKING AND FINANCE

$ (billions)

Global sukuk issuance trend, first quarter 2012 to first quarter 2014 45 40 35 30 25 20 15 10 5 0

Average volume 1Q12-1Q14: $31 billion

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14 Source: KFH Research

emirate, and it did so in February. While the maturity of the issue is likely to be short-term, this is an important step for the IDB that facilitates the financing of projects – many for infrastructure – in the 56 countries that are its members.

At the centre of Dubai’s efforts to promote itself as a hub for Islamic finance is a belief that, while the industry has now established itself across the world, particularly in Asia and the Middle East, borrowers and investors would still benefit from greater clarity in its rules and governance. As a first step, the Dubai Financial Market has issued new guidelines on the structuring of sukuk.

New structuring guidelines The rules, which were published in the spring, aim to reduce uncertainty by detailing how sukuk should be designed to conform to religious principles. The roles of Sharia advisers, particularly when conflicts of interest arise, also come under scrutiny. The final version includes guidance on

The value of sukuk issued in 2014 is expected to exceed $100 billion for the third successive year if yields remain sufficiently attractive how the rights of sukuk holders should be protected and, importantly, on the liabilities attached to the special purpose vehicles used in such transactions.

For example, the document stipulates that sukuk based on tangible assets or usufructs should not involve the fictitious transfers of assets; securities, it says, should be based on real and legal transfers. Depending on how the rules are applied, this could encourage issuers to follow the original, equity-like nature of sukuk. At present, some popular structures of sukuk that are used internationally resemble conventional bonds, even though the payment of interest is prohibited under Sharia law.

Nor should contracts remove the right of recourse of holders of Islamic bonds to the underlying asset. In fact, as per the document, such rights should be clearly stated.

Special purpose vehicles used for sukuk should also be independent of the issuer. So, holders of Islamic bonds should bear losses unless there is misconduct, negligence or a similar breach of the rules by the guarantor.

The guidelines nonetheless allow for a reserve account to protect holders from investment risks; this is financed through deductions of realised profits. The document also suggests what could trigger a default and how such cases should be settled. Importantly, however, the guidelines are silent on the question of which law should apply when constructing and issuing sukuk. At present, English law is often used for international issues.

It is a good time for Dubai to promote itself as a centre for Islamic finance, particularly sukuk. After a bumpy 2013, when the volume of Islamic bonds issued worldwide dipped by 13 per cent, the prospects for this year look better. This is in part because the Malaysian Government, the dominant issuer worldwide, is likely to step up its offerings of sukuk; and in part because of the demand for infrastructure in the Gulf and the wider Middle East, much of which could be financed through the issue of Islamic bonds.

What is more, the value of sukuk issued in 2014 is expected to exceed $100 billion for the third successive year if yields remain sufficiently attractive for investors.

And issuers from the private sector are likely to play a bigger role in 2014, even though governments in Asia and the Middle East (as well as an increasing number from sub-Saharan Africa) are expected to tap the market.

Regional dominance That said, the market for sukuk still remains largely regional. During the past decade, the issuance of local sukuk in Malaysia and the countries of the Gulf Cooperation Council has largely fuelled the market’s

UNITED ARAB EMIRATES – GROWTH OF A NATION 90

BANKING AND FINANCE

capital markets, just as better standards of regulation and governance give them more confidence to do so.

That, at least, is the theory. Certainly, the credit risk involved in some issues, in addition to doubts about the standards of compliance, still deter some investors from buying Islamic bonds. Such anxieties have typically accounted for a premium over conventional bonds in the price offered for sukuk. Yet this could be largely overcome if more pension funds, insurance companies and other such institutional investors became active in the market. Liquidity begets confidence, which in turn encourages more liquidity.

Basel III standard

BAZUKI MUHAMMAD/CORBIS

impressive growth. In fact, according to ratings agency Standard & Poor’s, only 16 per cent of the $117 billion worth of sukuk issued worldwide last year was truly “international” – that is, issued and traded on large exchanges and in hard currencies such as the dollar.

Even then, most such issues are still launched either in Malaysia or the Gulf. Since 2001, Standard & Poor’s has counted only about 20 international issues of sukuk (worth a total of $10 billion) domiciled outside these countries. So Dubai will be following a well-trodden path as it promotes itself as a centre for such finance.

Indeed, many in the industry believe that a combination of infrastructure on a grand scale, a trend towards refinancing by companies across the Gulf and the tighter regulation of banks worldwide is likely to push sukuk to the fore. As finance from banks becomes harder to secure, companies in the region will turn more and more to their

Maybank Tower in Kuala Lumpur, home to Malaysia’s largest financial services group. The UAE is fostering closer economic ties with Malaysia

Another incentive to tap the market for sukuk, particularly for banks, is that the proceeds count towards capital under Basel III, the most recent standard to be introduced by the Basel Committee on Banking Supervision. Under guidelines issued in 2013 by the Islamic Finance Services Board, which presides over such things from Kuala Lumpur, Islamic banks may use certain classes of sukuk to meet their requirements for supplementary capital.

The guidelines are mainly designed to confirm an approach pioneered by banks in the UAE and Turkey, whose institutions were among the first to strengthen their balance sheets in this way. The issues hark back to an old structure of sukuk that enables the manager to indemnify the investor if it chooses. The structure then allows, in certain circumstances, for the original capital to be returned.

Since the new rules under Basel III reduce the capital buffer of Islamic banks by an average of three per cent, according to calculations by professional services firm EY, there is an incentive for banks to go to the market in this way. Among the most recent to do so is Saudi Arabia’s National Commercial Bank, which offered bonds with a 10-year maturity with an option to redeem them after five. The new rules also apply to takaful operators, or those offering Islamic insurance.

With corporate issuance of sukuk up by a fifth in 2013 and analysts expecting the trend to continue throughout 2014, the market for such bonds looks set to prosper.

Indeed, supporters of Islamic bonds are close to achieving what a budding market requires: the liquidity provided by regular issuers such as governments and international bodies, supplemented by banks and companies seeking to support their businesses.

In the future, much will depend on the speed with which the economies of the developing world expand, particularly those in the Middle East and Asia. In such circumstances, Dubai is right to underline its standing as a centre for Islamic finance and, in particular, its determination to protect the rights of borrowers and investors alike. As home to no fewer than four of the world’s 20 largest Islamic banks by capitalisation, the UAE has a role to play in encouraging the industry to expand. So, by extension, does Dubai.

UNITED ARAB EMIRATES – GROWTH OF A NATION 91

ADVERTISEMENT

Building on good fortune The United Arab Emirates has demonstrated the fundamental strength of its economic model as official institutions across the region – and around the world – look to reappraise their investment strategies

Rod Ringrow Senior Vice President State Street Bank and Trust Representative Office Dubai, UAE

It is one thing for a nation to be blessed with great resources of oil and gas. It is quite another to make the most of them.

Only relatively few countries have successfully used mineral wealth to diversify their economies while attracting investment from around the world and creating transformational infrastructure.

As dramatic new towers, highway networks and thriving new ports attest, the UAE has done all of that – and more.

In the past few years, the UAE has also demonstrated the fundamental strength of its economic model, emerging stronger than ever from the fiscal crisis that shook the world at the end of the last decade.

In at the beginning As a senior representative of State Street, a global company that has been privileged to be a strategic partner in the UAE for the past quarter century, it is gratifying to see how far the nation has come under the judicious stewardship of its successive leaders. State Street is proud of its longstanding relationship with the Government of the UAE. Over that time, the population of Dubai, the nation’s most populous city, has more than quadrupled to the current count of more than two million people.

Much of that increase is due to immigration from around the world.

And people continue to come to the UAE for the best of reasons: it is a stimulating place to live and to do business.

Global appeal; global challenges Much of the UAE’s appeal is based on its dedication to open commerce, as typified by the establishment of the country’s free trade zones. Current plans for more diversification, breakthroughs in education and new infrastructure in the northern states are inspiring even greater levels of confidence in the UAE’s future.

In the UAE – and elsewhere in the region and around the world – the institutional beneficiaries of past and projected growth are reappraising their investment strategies. While sovereign wealth funds, public pension reserve funds and central banks differ in size, age, structure, funding sources, policy objectives and risk/return profiles, they share certain priorities. All need new organisational structures to promote better communication,

cooperation and investment practices.

To manage for success throughout the economic cycle, many are exploring new markets and asset classes.

According to a newly published State Street and FT Remark study, fund managers’ goals are twofold: enhanced returns and wider portfolio diversity.1

Managing change Our research, which surveyed senior executives at 62 official institutions across the Middle East, Europe, Africa, the Americas and Asia Pacific, shows that managers are well aware of the implications involved in modifying their investment strategies. Changes in direction can impinge on risk, operational efficiencies and security, recruitment requirements and performance measurements.

These considerations notwithstanding, most survey participants planned significant innovations to their portfolios.

For example, 80 per cent are looking to

Top priorities for official institutions Percentage who rate as significant challenge* Percentage who rate as number one challenge Managing risk Managing data

Supporting governance requirements Developing talent

50%

13%

Improving operational efficiency Optimising investment strategy

65%

25% 47%

21%

44%

13% 15% 13%

31% 29%

*Multiple selections allowed. Source: State Street 2014 Official Institutions Study

1. State Street 2014 Official Institutions Study conducted during January 2014 by FT Remark. All figures cited in this article come from this research, unless otherwise noted.

ADVERTISEMENT

About State Street State Street Corporation (NYSE: STT) is one of the world’s leading providers of financial services to institutional investors including investment servicing, investment management and investment research and trading.

With US$27.5 trillion in assets under custody and administration and US$2.4 trillion in assets under management* at 31 March 2014, State Street operates in more than 100 geographic markets worldwide, including the US, Canada, Europe, the Middle East and Asia. *This AUM includes the assets of the SPDR® Gold ETF (approximately US$34 billion as of 31 March 2014), for which State Street Global Markets, LLC, an affiliate of SSGA, serves as the distribution agent.

increase their exposure to emerging market equities over the next two years.

Just under half (47 per cent) are looking for greater involvement in real estate and infrastructure investments.

Regulation and risk Official institutions have a particular focus on regulation. Some 73 per cent of individuals we surveyed acknowledge difficulty in keeping on top of changing regulatory environments. Almost half are concerned about liquidity as banks exit trading businesses that require significant

capital. Our research also shows that 35 per cent of those questioned are concerned that the cost of execution will rise as a result of new requirements for additional reporting.

Given these concerns, it is consistent that 65 per cent of official institutions admit to finding risk management difficult to get right. Just under 30 per cent believe that the main challenge they face is in combining risk measures across different asset classes. Greater portfolio diversification will only intensify this potential problem. More than half believe that managing and monitoring their levels of currency risk is also a key challenge.

To meet those challenges – as well as others identified in the State Street research – official institutions are striving for an efficient, streamlined yet resilient operating model. Reducing costs while maintaining standards is essential to this.

So are the right combinations of process and technology, as well as improved use of data to generate the insights needed for better-informed investment decisions.

The right people; the right future The most important factor is attracting and retaining the right people. Given its recent past and promising future, UAE institutions are ideally placed to do this – and not just from the expatriate talent pool but from within the nation itself. At State Street, we have made knowledge transfer an integral component of our business philosophy.

This principle benefits us at State Street as well as the local, national and regional

economies. Having been in at the start of the UAE’s phenomenal success story, we are proud to be a part of the chapters still being planned: building a foundation of continuing prosperity for contemporary Emiratis and helping to secure the future for generations to come.

Disclaimer: The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

State Street Global Advisors, Middle East; State Street Bank and Trust Company (Representative Office) Boulevard Plaza, Tower 1 Suite 1703, 17th Floor Dubai, United Arab Emirates Mailing Address: PO Box 26838 Dubai, United Arab Emirates T: +971 4 437 2800 F: +971 4 437 2818

BANKING AND FINANCE

Free to zone in on growth Now home to more than 900 companies, the Dubai International Finance Centre sets an example of how to capitalise on an independent legal system

THE DUBAI INTERNATIONAL FINANCIAL Centre (DIFC) has been aptly described as the gateway to the Gulf, the Middle East and North Africa. Founded in 2004, it comprises a web of infrastructure, both fiscal and legal, with a dedicated office district that enjoys the status of a financial and legal free zone in the United Arab Emirates. As such, companies locating in the DIFC benefit from a variety of incentives, including full foreign ownership, no taxes on profits or

incomes (together with a wide network of treaties to avoid double taxation), and no exchange controls. In addition, the DIFC constitutes its own jurisdiction, which is separate from the rest of the UAE’s legal and judicial systems. The DIFC also possesses a one-stop shop for processing visas, work permits and other such requirements.

Over the past decade, the DIFC has continued to grow, and today it constitutes the largest single cluster of international firms in financial services between Singapore

UNITED ARAB EMIRATES – GROWTH OF A NATION 94

NOVARC IMAGES/ALAMY

BANKING AND FINANCE

The Emirates Towers framed by the Gate Building, all landmarks of the Dubai International Financial Centre

UNITED ARAB EMIRATES – GROWTH OF A NATION 95

BANKING AND FINANCE

and Europe, with more than 900 companies operating within its gates.

The DIFC’s client base includes 21 of the world’s top 25 banks, six of the world’s top 10 insurance companies and law firms, and 11 of the world’s top 20 money managers. Of its clients, the largest single component, 36 per cent, come from Europe, followed by companies from the Middle East (27 per cent), North America (16 per cent), Asia (11 per cent) and the rest of the world (10 per cent).

Avoiding unnecessary regulatory burdens

services conducted through the DIFC. The remit of the DFSA is “to be risk-based and avoid unnecessary regulatory burdens”, which means the agency tends to focus more on achieving appropriate outcomes than Rest of the world on prescribing the exact manner in which these should be achieved.

In addition to its ‘light touch’ approach, the DIFC benefits from legal arrangements unique to the Gulf.

The centre has its own courts, which Europe operate under the common law system used in the United Kingdom and the United States, rather than the UAE’s civil and commercial (but not criminal) codes, thus smoothing any discrepancies that may arise between the two systems. The DIFC’s Middle East courts consist of a small claims court, court of first instance, and a court of appeal. Companies operating in the DIFC also have the option to set their legal jurisdiction of choice through contract, although the DIFC’s system is the default option. In partnership with the London Court of International Arbitration (LCIA), the DIFC also operates an arbitration centre, which is based on the laws and principles developed by the LCIA. In March 2014, the DIFC also signed a memorandum of governance with the Australian Federal Court.

DIFC-regulated companies, by region

10%

11% Asia

16% North America

In 2012, the DIFC restructured itself to split the organisation into DIFC Properties, which deals with the real estate side of the business, and the DIFC Authority, which acts as the arm for business development. In terms of its layout, the DIFC consists of an office zone, residential zone, and ‘town centre’ providing facilities such as restaurants and entertainment. The district benefits from two metro stations and is connected to Dubai’s extensive network of roads which, along with the emirate’s airport (one of the busiest in the world, with 66 million passengers a year) ensures easy connections for businesses located at the DIFC. On top of the transport links, the DIFC also benefits from its own data protection regulations and is home to four data centres.

As well as banks, both domestic and foreign, the DIFC is open to insurance firms, investment banks, companies in financial mediation, venture capitalists and private equity groups. The DIFC also houses an important core of groups in Islamic banking, which offer Sharia-compliant financial

36%

27%

Standards of corporate governance

In addition to its ‘light touch’ approach to regulation, the DIFC benefits from legal arrangements unique to the Gulf products. Moreover, groups in professional services such as law firms, consultancies and those in risk management are all eligible to set up in the centre, along with global corporates seeking a regional headquarters.

Regulation constitutes a key plank of the DIFC’s offering. The regulatory body, the Dubai Financial Services Authority (DFSA), is an independent agency of the emirate of Dubai and is the sole regulator for financial and ancillary

Services based on Islamic finance have witnessed strong growth in recent years, accounting for around a quarter of the market in the six Gulf Cooperation Council countries, according to estimates from professional services firm EY. As befits a financial centre located in a Muslim country, Dubai is looking to capitalise on this trend and, in 2013, the Emirate of Dubai set up the Dubai Centre for Islamic Banking and Finance. Furthermore, the DIFC, as well as seeking to position itself as a global centre for Islamic finance, is looking to further the development of the sector, particularly in areas such as regulation and new financial products. To this end, it is a member of the International Islamic Financial Market, a body that seeks to develop the industry of Islamic finance. In April, at a meeting held at the DIFC, the body set out a road map for standardising the guidelines for issuing sukuk (or Sharia-compliant bonds).

The market for sukuk was worth $117 billion in 2013, according to data from Zawya, part of Thomson Reuters; and the earliest sukuk to be issued under the new standards are expected to start next year.

In addition to developing Islamic finance, the DIFC is making efforts to improve standards of corporate

UNITED ARAB EMIRATES – GROWTH OF A NATION 96

KEVPIX/ALAMY

BANKING AND FINANCE

governance in the region. It is doing this through the DIFC-based Hawkamah, an institute specialising in corporate governance. It was set up in 2006 as a partnership between the DIFC and number of international bodies such as the Organisation for Economic Co-operation and Development, and the World Bank, along with organisations such as the Dubai School of Government and various chambers of commerce and financial regulators across the Middle East and North Africa. Hawkamah promotes good practice across the region through its six taskforces, which deal with various aspects of governance as well as participating in an annual conference. In addition, Hawkamah offers tailor-made consultations to small and medium-sized companies and family businesses, as well as to state-owned enterprises and public companies.

Over the past year, the DIFC has continued to receive investment, and a number of factors have contributed to its success. In August 2013, the European Commission announced that it was granting the DFSA an equivalent status to those with audit oversight standards within the European Union. This allows regulators to enter into

The Dubai International Financial Centre is aptly described as the gateway to the Gulf, the Middle East and North Africa

cooperation agreements with the DFSA. This, in turn, should open the door to DIFC-based wealth managers being able to access funds in Europe, which until now have remained beyond their reach. Moreover, in 2013, a number of ratings agencies upgraded the UAE’s financial markets from ‘frontier’ to ‘emerging’, which should help to promote confidence among international investors in the UAE and in the DIFC in particular.

What is more, a number of Chinese banks set up shop in the DIFC during the course of 2013, signalling a greater eagerness among East Asian investors to locate and do business in Dubai. Increasingly, Chinese companies are investing in Africa as their domestic economy grows and its requirements for resources multiply accordingly. However, the fact that the physical and legal infrastructure in many parts of Africa remains undeveloped means that many Chinese banks have been wary of entering the continent on a large scale. By locating in the DIFC, which offers a reliable legal system and good connections, Chinese banks and investment firms can set up dedicated operations in the Middle East and Africa while avoiding some of the pitfalls.

UNITED ARAB EMIRATES – GROWTH OF A NATION 97

SPONSORED FEATURE

UAE: a global hub for commerce John Iossifidis is an experienced banking professional having worked in large multinational and regional financial institutions in the Middle East, Asia and Australia.

Currently EVP and Group Head, International Banking at Mashreqbank, John is a member of the Executive Committee with primary accountability for developing the Bank’s international franchise. He is responsible for the Bank’s 11 operations outside the UAE and runs the Bank’s Financial Institutions business.

Prior to Mashreq, John was Regional Head, Origination

Before the skyscrapers, mega malls and hotels, foreign trade was the UAE’s claim to fame. The UAE appeared in trading routes as early as 3000BC, motivated by the trade in copper, from the Hajar mountains.

Trade continues to be at the forefront of the UAE’s growth. Trade per capita is approx. $62,000 according to the WTO (2010-2012).

To put that into context, the same figure for the UK is a little more than $24,000. The World Economic Forum ranks the UAE as the best place in the MENA region for trade and number one in the world for transport and communications infrastructure.

The UAE’s success as a dynamic hub for global commerce built on three factors: 1 strategic location between East and West; 2 unmatched first world infrastructure 3 stability and security which have made the UAE a “safe haven” for investors amid the political turbulence gripping the Arab world.

These factors provide optimum trading conditions and mean the UAE is poised to take advantage of economic activity among the world’s fastest growing and developing economies in the emerging markets in Asia, the Middle East and Africa. As such, thousands of Chinese businesses use Dubai as a hub for Africa. Indian traders use the emirate to access

& Client Coverage, Wholesale Banking with Standard Chartered Bank (SCB). John joined SCB in 2000, following the acquisition of Grindlays Bank, where he successfully integrated the two banks. In 2002 he moved to Singapore in a strategy development role.

Before joining the SCB, John had a 16 year career with ANZ Bank in various corporate banking, strategy development, project management and finance roles. His last role at ANZ was CEO Sri Lanka.

John graduated from Monash University, Australia in 1984 [B.Ec (Acctg)], completed an MBA again from Monash University in 1992 and is a Fellow of the Australian Institute of Bankers.

the world. And, of course, Western multi-nationals use the UAE as a hub for Middle East and increasingly Africa.

Mashreqbank: Connecting the World from the UAE In this context, Mashreq is uniquely placed to connect businesses globally. Established in 1967, it is the second oldest bank in the UAE. The Bank’s heritage is closely linked with the creation of the modern UAE. It is therefore no surprise that Mashreq has established itself as one of the region’s leading commercial bank with a focus on cross border trade finance.

Our geographic footprint and focus is entirely consistent with the UAE’s role of being at the centre of Asian, Middle East and African trade. The Bank has extensive knowledge of world-wide markets, regulations and authorities arising from deep routed experience. It is present in 12 countries with 23 overseas offices including branches in Qatar, Kuwait, Bahrain, Egypt and the financial hubs of Dubai, New York, London, Hong Kong and Mumbai. These are supported by representative offices in Pakistan, Bangladesh and Nepal and a global network of correspondent banks covering 81 countries. So, if ever you need to trade in the world’s fastest growing economies, you know where to call.

Mashreq also enables clients to forgo extra infrastructure costs and the deployment of

John Iossifidis, Head of International Banking: Johni@mashreq.com Rahul Jayakar, Head of Transaction Banking, IBG: RahulJ@mashreq.com Mashreq Bank PSC, Head Office, Dubai, UAE, PO Box 1250 T: +971 (4) 207 7265 / 7217 F: +971 4 424 7338

resources by providing them state-of-art electronic banking platform right in their office.

The centralized processing capability, coupled with robust core banking platform, presents itself in the most user-friendly yet standardized look and feel across our network.

We are also uniquely placed to link clients who aspire to participate in the phenomenal array of development projects in the region.

GCC countries have grown their economies by being among the world’s lowest cost producers of energy. The past decade has seen these countries diversifying away from oil; billions of dollars have been invested in developing world class infrastructure, transport connectivity and logistics, which provides tremendous opportunity for corporates and contractors alike. Mashreq should be your bank of choice.

We Make Possible At Mashreq, our culture is relationship driven.

We believe that our success depends on establishing lasting, mutually beneficial partnerships. Mashreq clearly understands its role in the financial eco system where it is a banker to most local banks in the fastest growing emerging geographies; and at the same time being a very important service provider to our corporate clients in the financial value chain connecting domestic businesses globally. Our services underline our philosophy of ‘We Make Possible’.

BANKING AND FINANCE

View from the Abu Dhabi Investment Authority (ADIA) headquarters. While some funds invest within the UAE, ADIA aims instead for a broad spread across geographical regions

UNITED ARAB EMIRATES – GROWTH OF A NATION 100

BANKING AND FINANCE

The rise of sovereign wealth funds At the forefront of the trend towards SWFs, the United Arab Emirates has several such funds, each with a different purpose and mandate

held assets to the tune of $700 billion. This was second only to China, whose sovereign funds then held assets worth around $831 billion, although the Abu Dhabi Investment Authority (ADIA), one of a number of SWFs in the UAE, was the largest such fund in the world at the time, with assets of $627 billion.

Introducing the UAE’s funds The UAE, thanks to its federal nature, is home to several SWFs, each of which serves a different purpose and holds a different mandate. In addition to ADIA, there is the Abu Dhabi Investment Council (ADIC) and, on a federal level, the Emirates Investment Authority (EIA). Some authorities, such as the Sovereign Wealth Fund Institute (SWFI), also classify the Mubadala Development Corporation, Investment Corporation of Dubai (ICD) and the RAK Investment Authority (RAKIA) as SWFs. These are owned by the emirates of Abu Dhabi, Dubai and Ras Al Khaimah respectively.

In 2012, the latest year for which figures are available, ADIA reported annualised returns of 7.6 per cent over 20 years and 8.2 per cent over 30 years. About 75 per cent of ADIA’s assets are managed by external fund managers and around 55 per cent of its assets are invested in strategies

THOMAS KOEHLER/PHOTOTHEK IMAGES UG/ALAMY

OVER RECENT YEARS, SOVEREIGN WEALTH funds (SWFs) have come to assume increasing prominence, both in terms of their importance as sources of investment and for the increased public interest they create as a result of this growing importance.

SWFs are set up to meet a variety of purposes: to save budget surpluses for a ‘rainy day’; to store the value of an unexpected economic windfall (often, though not always, resulting from a rise in commodity prices); or to help manage the value of a currency’s exchange rate. While this rise in prominence has been marked by a certain suspicion in some quarters, this is largely due to a lack of transparency, rather than sinister motives on the part of SWFs. The Gulf has been at the forefront of the trend towards SWFs, with the first such fund in the world – the Kuwait Investment Authority – founded in 1953, some 10 years ahead of Kuwaiti independence in 1963. It has a mandate to invest the country’s oil windfall for use once the revenues run out. Many other Gulf states have followed suit, setting up funds such as the Qatar Investment Authority, or Bahrain’s Mumtalakat (a holding company of state-owned enterprises as well as a strategic investor).

According to figures compiled by The Economist, in March 2011, the United Arab Emirates’ SWFs, taken in aggregate,

UNITED ARAB EMIRATES – GROWTH OF A NATION 101

l ss

BANKING AND FINANCE

Abu Dhabi Investment Authority management, but has gradually widened the scope of its asset classes. In 1993, ADIA introduced its so-called ‘neutral benchmark’, under which a broad spread of asset classes and a geographical reach is maintained across ADIA’s portfolio. ADIA does not invest in the United Arab Emirates, nor does it seek to control the management of those companies in which it invests and therefore eschews its voting rights, except where this might compromise the interests of shareholders as a whole.

Assets under management: $773 billion

The Abu Dhabi Investment Authority (ADIA) is an independent institution wholly owned by the Government of Abu Dhabi. It was founded as an independent body in 1976, replacing the Abu Dhabi Financial Investments Board created in 1967 as part of the Abu Dhabi Ministry of Finance. Since 1981, ADIA has had a mandate to invest for the sake of future generations and, at the time, to meet any financial contribution that the Abu Dhabi Government might require of it. As is the case with many sovereign wealth funds (SWFs), ADIA maintains a conservative approach to risk

ADIA neutral benchmark

Abu Dhabi Investment Council The Abu Dhabi Investment Council (ADIC) was founded in 2006. Its mandate is to invest with a view to broadening Abu Dhabi’s economic base and facilitating the development of local companies internationally. ADIC was seeded with ADIA’s holdings in 12 companies owned by the emirate, mostly banks and telecommunications firms, along with a portion of Abu Dhabi National Oil Company (ADNOC) profits.

Since ADIC has no liabilities to the Abu Dhabi Government, it can afford to invest for the highest possible long-term returns, in asset classes that are not necessarily highly liquid. ADIC is organised around streams investing in private equity, real estate, infrastructure, equities and fixed income, direct investments, active investment strategies (which aim to generate risk-adjusted returns by investing in hedge funds, seed hedge funds etc) as well as global special situations (ie one-off opportunities that may not fit into any of the other categories). In terms of strategy, ADIC aims to preserve its capital while generating good returns, and has a focus on investing in Abu Dhabi’s economy, although its portfolio spans the globe.

Assets under management: $90 billion

Geographical spread Region

Minimum

Maximum

North America

35%

50%

Europe

20%

35%

Emerging markets

15%

25%

Developed Asia

10%

20%

Asset class spread Asset class

Minimum

Maximum

Developed equities

32%

42%

Emerging market equities

10%

20%

Small cap equities

1%

5%

Government bonds

10%

20%

Credit

5%

10%

Alternative

5%

10%

Real estate

5%

10%

Private equity

2%

8%

Infrastructure

1%

5%

Cash

0

10%

Emirates Investment Authority The Emirates Investment Authority (EIA) was founded in 2007 to manage a number of assets held by the federal government of the UAE. Its mandate is to invest funds allocated by the government to create value for the country over the long term. It was seeded with federal holdings in a number of state-owned enterprises, including Etisalat and du, two UAE-based telecommunications groups. EIA invests extensively at home, but also holds investments outside the country.

Assets under management: $15 billion

Note: totals may add up to more than 100% due to fluctuations within the benchmark

Source for ADIA neutral benchmark: ADIA 2013 Review. Source for assets under management: Sovereign Wealth Fund Institute

UNITED ARAB EMIRATES – GROWTH OF A NATION 102

that replicate certain indices. ADIA is generally regarded as a conservative investor, and follows its own internal benchmarking to ensure that only so many of its assets are invested in any one class or geographical region (see box, opposite). ADIC, on the other hand, has an altogether different mandate, which is to invest in its home emirate with a view to diversifying the local economy and helping local firms to expand overseas. ADIA, by contrast, does not invest in the UAE as a matter of policy. The EIA, meanwhile, manages assets held by the federal government of the UAE, primarily state-owned enterprises such as telecommunications firms, with the aim of maximising the performance of public stakes in such firms.

Mubadala is an investment company owned by the emirate of Abu Dhabi, which supports the development of the UAE by investing in social infrastructure and building industry in Abu Dhabi. Its assets comprise a variety of stakes in UAE and international companies, which Mubadala reported as being worth AED223.8 billion ($60.9 billion) in 2013, compared with AED202 billion ($55 billion) in 2012.

ICD’s portfolio consists of stakes in businesses wholly and partly owned by the state, and the fund is charged with generating superior returns in such a way as to benefit the region’s financial community. Among ICD’s assets are firms such as Emaar, a property developer, the Emirates airline and Emirates Global Aluminium. RAKIA, while it has made some investments abroad, acts primarily as an operator of industrial estates and free zones in order to generate returns for the Government of Ras Al Khaimah.

Sound commercial basis In a number of countries, both developed and developing, the rise of SWFs over the past decade has at times been characterised as foreign governments trying to ‘buy up’ local assets and thereby acquire commercial know-how.

As outlined here, however, SWFs in fact play a number of different roles. All work to a specific mandate, which precludes them from making investments on anything

SOPHIE JAMES/ALAMY

BANKING AND FINANCE

ADIA HQ on the Abu Dhabi Corniche. In 2012, ADIA reported annualised returns of 7.6 per cent over 20 years

SWFs are generally constrained by virtue of their charters to take a long-term, often cautious approach to investment other than a sound commercial basis. While most Middle Eastern and East Asian SWFs are not yet considered as transparent as funds based in Europe or North America, they have been moving slowly in this direction, particularly to allay such misgivings and to protect their investments.

Indeed, in 2008, ADIA was instrumental in forming the International Working Group of Sovereign Wealth Funds (IWG), which was co-chaired by ADIA’s Hamad Al Hurr

Al Suwaidi. Subsequently, the organisation rebranded itself as the International Forum of Sovereign Wealth Funds (IFSWF). In 2008, the IWG reached an agreement on a voluntary code of practice, known as the Santiago Principles, after the Chilean capital where the code was drawn up. The Principles state, among other things, that SWFs should not seek to take advantage of privileged information; that they should publicly disclose their policy of voting as a shareholder and follow consistent guidelines; that they should disclose their framework of governance, mandate and investment policy and produce an annual report that is publicly available; and, last but not least, that their operations and financial standards should be audited on a yearly basis to international standards.

Moreover, SWFs are by no means bad for the global economy as a whole. Emerging markets (the source of many SWFs) are gradually becoming more dominant, while the rise in commodity prices over the past decade has meant that SWFs are likely to continue to receive allocations of funding and to invest accordingly. Indeed, given that SWFs are generally constrained by virtue of their charters to take a long-term, often cautious approach to investment, their increasing importance means that they are likely to balance a tendency towards short-termism. In turn, as SWFs become more influential in world markets, they could play a role in dampening speculation and producing a more stable, long-term outlook for the global economy.

UNITED ARAB EMIRATES – GROWTH OF A NATION 103

BANKING AND FINANCE

A new era for UAE insurers Insurers and takaful operators in the United Arab Emirates are competing for market share as the sector gathers pace

MOST REGULATORS WOULD BE HAPPY IF their insurance industry were growing at a healthy rate, but this is not the case for Ebrahim Obaid Al Zaabi, director general of the Insurance Authority of the United Arab Emirates. Last year, Al Zaabi unveiled new regulations that he hopes will not only provide a sounder footing for the industry, but, in time, will also accelerate its growth. Among the new laws to be phased in is a code of practice for brokers. A board of Sharia scholars will also be introduced in order to oversee the development of takaful, or Islamic insurance.

Al Zaabi’s approach stems partly from the fact that the insurance industry has enjoyed a boost of late. In common with insurers elsewhere in Gulf Cooperation Council (GCC) countries, those in the UAE have seen the value of gross premiums written rise at a compound annual growth rate of just over 20 per cent during the past decade or so. According to analysis by AM Best, a ratings agency, this is much the same as in Brazil and China. Such a pace enables firms not just to set ambitious targets, but also to withstand the occasional knock that is to be expected in budding markets.

The existence of a ‘national champion’ holds back some markets, while, conversely, individual insurers in the Gulf have sometimes struggled to find sufficient scale. The problem in the UAE – as in other GCC markets – is not that a behemoth is crowding out would-be competitors, but that there are a relatively large number of small firms fighting for sales. This may be good in some ways for customers, but it also makes it harder for companies to make a reasonable return and consequently sustain their future.

New legislation At the last count, there were no fewer than 300 brokers and more than 60 insurers in the UAE which, together with Saudi Arabia, dominates the industry across the GCC. Yet in the UAE alone, gross premiums as a percentage of gross domestic product (GDP), a measure of the insurance industry’s clout within the economy as a whole, are still only around two per cent, suggesting that there could be a lot more growth to come. As in other GCC countries, non-life insurance makes up the lion’s share of premiums in

Cover for healthcare and motor risks represents 60 per cent of all premiums in GCC countries

UNITED ARAB EMIRATES – GROWTH OF A NATION 104

CELIA PETERSON/GETTY IMAGES

BANKING AND FINANCE

UNITED ARAB EMIRATES – GROWTH OF A NATION 105

BANKING AND FINANCE

the UAE. Of this, compulsory forms of cover, such as motor and health, dominate the market. Indeed, medical insurance is likely to contribute even more in the future. This is due to the fact that Dubai recently introduced legislation making it compulsory for firms to introduce cover for their employees.

As in Abu Dhabi, which took the first step towards mandatory health insurance in 2005, Dubai’s scheme is to be phased in over time. To start with, companies with 1,000 employees or more will be required from October 2014 to introduce medical cover for all workers. Those with between 100 and 999 employers will be expected to do so by the end of July 2015; and firms with fewer than 100 employees must provide coverage by June the following year. An online platform called Bayzat is expected to speed up the process and make it easier for firms to meet their obligations.

Dubai’s decision to make medical insurance compulsory is likely to have a pronounced effect on the market. Indeed, ratings agency Standard & Poor’s estimates that health cover accounts for about 40 per cent of all premiums in Abu Dhabi and for approximately 55 per cent of those in Saudi Arabia. A difference between Abu Dhabi and Dubai is that, in the former emirate, all nationals are provided with medical cover through a third-party administrator, which is subsidised by the government.

Yet the change to the insurance market in Dubai could still be gradual. This is due in part to the fact that many large companies already offer medical insurance to employees, and is in part because margins on health cover can be slim, particularly if competition to win the business is fierce. So it is unlikely that there will be any immediate windfalls for insurers, even if the volume of new business picks up comparatively quickly.

Not surprisingly, perhaps, a combination of health cover and insurance for motor risks is likely to dominate the UAE market for some time to come. Together, these types of insurance account for nearly 60 per cent of premiums across the economies of the GCC. Life cover is likely to remain marginal as a source of new business over the next few years. This is because a majority of residents have yet to be persuaded of the benefits, and also because insurers themselves have done little to encourage customers to take the plunge.

International reinsurers share risk As in other markets within the GCC, insurers in the UAE have tended to cede a large proportion of their risks to reinsurers, many of them international. Indeed, figures compiled by AM Best suggest that, in 2002, as many as 60 per cent of direct premiums written within the countries of the GCC were ceded in this way. At the last count, the proportion had fallen to around 40 per cent, as local firms became more confident about underwriting certain risks, particularly commercial ones, and the incentives paid to them in the form of commissions tailed off.

ARABIANEYE/GETTY IMAGES

Dubai is following Abu Dhabi’s lead by phasing in compulsory health insurance

Granted, the global financial crisis of 2008 and its knock-on effects at regional level had an impact on the amount of infrastructure and commercial property being built in the region. This, in turn, reduced the number of risks for which developers in the UAE and other parts of the Gulf needed cover. Yet there has also been a shift

There seems little doubt that the model used by takaful operators in the UAE will endure, but firms may have to alter their approach by reinsurers away from London and other international centres and towards the Gulf itself. Take the Dubai International Financial Centre: this and other free zones in the Gulf have served to open up the local market, and encouraged international operators to set up shop there.

UNITED ARAB EMIRATES – GROWTH OF A NATION 106

BANKING AND FINANCE

FRANK SORGE/CARO/ALAMY

popular over time. Such arrangements are notoriously difficult to price, even though they have proved popular with insurance companies on the ground.

Competition and overcapacity in the UAE have also made things tougher of late for operators of takaful and retakaful – those, in other words, offering Islamic insurance and reinsurance. This is largely the result, says Standard & Poor’s, of such companies having to compete directly with conventional forms of cover. Takaful operators have less of a following in the UAE because they are newer to the market, so they depend more on intermediaries that charge higher commissions, or what are known as wakalah fees, which tends to erode the operators’ margins. Consider Dubai Islamic Insurance & Reinsurance Company (or AMAN, as it is known). Although it underwrites a diverse range of risks, the operator cedes more than two thirds of its premiums to international reinsurers. This leaves it with a residual net exposure to motor risk, which is one of the most competitive parts of the market. As a result, AMAN’s earnings have failed to sparkle of late and are unlikely to do so over the next year or two either.

Healthy expansion over time

This is particularly true of reinsurers and brokers, both of which are keen to win business in the Gulf and appreciate the value of local knowledge and expertise.

Historically, medical cover has largely been retained on insurers’ own books and has not been ceded to reinsurers, even in parts of the Gulf. So, as more and more of such business is handled by firms in the UAE, a larger proportion of the risks is likely to be retained at home. This, in turn, could trigger a review of rates and practices by reinsurers.

For example, in future, fewer risks might be accepted by reinsurers under so-called ‘treaties’, with more being diverted to excess of loss and other such forms of retrocession. The use of what are known as ‘bouquet treaties’, under which a mixture of non-life areas of business are lumped together, could also become less

A window cleaner abseiling in Dubai. Starting in October 2014, companies will gradually be required to provide health insurance for their employees

The takaful model, as it is used in most GCC countries, involves sharing the risks among the members of the fund.

So any underpricing of risks shows up as a deficit in the fund. This can only be recovered by larger contributions – effectively higher premiums – paid by the members of the fund. Yet, as mutual insurers elsewhere have shown, it is often difficult to recover past losses through supplementary calls on members.

There seems little doubt, says Standard & Poor’s, that the model used by takaful operators in the UAE will endure. It is just that firms may have to alter their approach, particularly at times when there is too much capacity chasing too little business. Since the loss ratios seen recently are not unusual, takaful operators may have to prune their expenses and match them more closely to the level of business they generate.

By and large, insurers in the UAE enjoy strong balance sheets and a robust approach to their industry. True, many would like to see more bond markets in the region, so that they could rely less on equities and earnings from property to bolster their investments. True, too, many would prefer to see a little less competition in some markets (such as motor and health) so that their margins would be wider.

Some also say it would be useful if they could diversify into fresh markets in the region. This, for the moment at least, is unlikely to happen. Though competition is sometimes intense, the average penetration of insurance cover in the region remains low, particularly in the case of life assurance. So the market is likely to expand at a healthy rate over time, as the UAE’s citizens and residents are persuaded of the benefits of insurance.

UNITED ARAB EMIRATES – GROWTH OF A NATION 107

INTERVIEW

His Excellency Suhail bin Mohammed Faraj Faris Al Mazrouei The United Arab Emirates’s minister of energy explains how the country is upgrading its oil, gas and petrochemical sector by investing in technological advances such as enhanced oil recovery and carbon capture, usage and storage, and how the industry benefits from high levels of private-sector investment

Q

How are the United Arab Emirates’ development plans for new oil and gas fields progressing?

Abu Dhabi has a programme to upgrade its oil, gas and petrochemical sector, and is targeting production capacity of 3.5 million barrels per day (mbpd) by 2017, and, in total, we expect to spend more than $70 billion to achieve this. We have also started developing some unconventional sour and tight gas, which will increase the country’s gas production by at least one billion CFD [cubic feet per day]. This additional gas is needed for the power generation sector. In addition to all this, we are looking for new sources of oil and gas, and have started awarding exploration acreage. In terms of operating companies, ADCO [the Abu Dhabi Company for Onshore Oil Operations] is well on the way to developing more fields to reach its target of 1.8mbpd, while ADMA [the Abu Dhabi Marine Operating Company] and ZADCO [the Zakum Development Company] are also moving forward with their plans to enhance production.

A

Q

How are the enhanced oil recovery (EOR) projects coming on? What is the latest on carbon dioxide capture, usage and storage/reinjection?

Masdar Carbon, one of the five integrated units of Masdar, and ADNOC [Abu Dhabi National Oil Company] have decided to extend their agreement for closer cooperation in carbon capture, usage and storage (CCUS). The first CCUS project will capture CO2 on site at Emirates Steel, the UAE’s largest steel-making facility. It will be compressed and transported along a 50km pipeline to oilfields operated

by ADNOC, where it will be injected into oilfields to enhance oil recovery. The project will sequester up to 800,000 tonnes of CO2 annually. Completion is slated for 2016.

A

For years, ADNOC has been looking for solutions to replace or reduce the natural gas used for injection in EOR schemes. So as well as the CCUS scheme, in 2011 ADNOC and Linde commissioned Elixier to capture nitrogen from the atmosphere for injection into one of our onshore fields.

Q

Do you anticipate any change in the existing concession model over upcoming years?

ADNOC, on behalf of the Supreme Petroleum Council (SPC), is in charge of developing the current concession model, which I am sure will be enhanced by capturing the lessons learned from the past. Concerning the new bid round of ADCO, what I can say is that it is fair and transparent, and we hope to have some results soon.

The nature of the concession agreement for the major companies is tax and royalties, and I don’t believe we are changing that.

A

Q

How are plans progressing on gas utilisation?

ADNOC is working on upgrading its gas network to optimise the integration and utilisation of the offshore and onshore facilities. There are a number of future domestic gas projects coming to the market from 2018-26, which focus on fields such as Hail, Hair Dalma, ABK pre-Khuff and Ghasha-Butini. The operators of these fields are working with us on these projects.

A

Q

Do you see technological advances in EOR and elsewhere expanding the potential recoverable oil reserves in the UAE?

Technological advances have always been the key driver in exploring new horizons and extracting additional oil reserves. Enhanced oil recovery is one of these

A

UNITED ARAB EMIRATES – GROWTH OF A NATION 109

New Horizons for Horizon Energy LLC...

HORIZON

Horizon Energy LLC

Since its establishment, Horizon Energy LLC, which specializes in services for the Oil & Gas industry, has been writing its success story with its investments in a portfolio of companies to help cater to the needs of its clients and partners within the Oil & Gas industry.

Horizon Energy LLC was formed to take advantage of investment opportunities in the Oil & Gas sector, and since its inception it has been working toward providing services through a portfolio of investments, which enables it to participate in a wide range of oilfield-related activity.

With strong associations across the Middle East, India and Europe, management knowledge of these regions and multinational partners who have worked in these regions for more than four decades, Horizon Energy is well-placed to guide its clients and partners towards opportunities in the industry.

Over the years, Horizon Energy LLC has been able to consolidate the expansion of its operations, and has developed capabilities in neighbouring regions, including MENA through well established companies and associations in the Oil & Gas sector.

Gulf Marine Services (GMS) Gulf Marine Services (GMS) was founded in Abu Dhabi in 1977. In 2007, the company was acquired by a consortium of investors, including Horizon Energy and has since become one of the largest providers of self-propelled self-elevating support vessels (SESVs) in the world. In March 2014 GMS achieved a premium listing on the London Stock Exchange, and a successful Initial Public Offering which raised gross proceeds of approximately US $110 million. The company, which constructs its SESVs in Abu Dhabi, intends to add a further six vessels to its fleet by 2016. The GMS fleet is capable of operations in the Middle East, South East Asia, West Africa and Europe. The vessels provide the stable platform for the delivery of a wide range of services throughout the total lifecycle of offshore oil, gas and renewable energy (wind farm-related) activities.

ALSA Engineering & Construction ALSA Engineering & Construction Co. LLC (ALSA), a sister company to Horizon Energy LLC, has been operating since 2004, and dedicates itself to multi-dimensional engineering and construction projects in the UAE, focusing mostly on the Oil & Gas sector. Projects have involved civil, mechanical, electrical, instrumentation and cathodic protection works. All these activities are performed to the highest standard by ALSA’s in-house team. ALSA’s expertise in the industry has made it the preferred partner for companies such as the ADNOC Group with which they have developed a close relationship over recent years. Their major projects include: ASR Gaswells Project for GASCO (US $77M), CO2 Injection Projects at Bab Far North and Rumaitha North (US $257M), and Construction of Multi Phase Pump, Multi Phase Selector Manifold and Multi Phase Flow Meter (US $29.4M).

Rashed Bin Jabr Al Suwaidi Chairman

Gulf Marine Services

ALSA

ENGINEERING & CONSTRUCTION CO LLC

ALSA Engineering & Construction

Control & Applications Emirates (CAE) / vMonitor Control & Applications Emirates (CAE), another company in the Horizon Energy LLC group, provides state-of-the-art technologies in electrical instrumentation and control systems. CAE executes major installation, commissioning, upgrade and maintenance projects in the Oil & Gas fields (offshore and onshore). Since 1977, CAE has executed more than 150 projects, undertaking complex and challenging tasks and completing them successfully and on time.

In November 2013, during the ADIPEC in Abu Dhabi, CAE announced that it had sold vMonitor to Rockwell Automation to become part of its Control Products & Solutions operating segment. vMonitor, a global technology leader for wireless solutions in the Oil & Gas industry, had originally formed part of the Control & Applications Emirates company.

Control & Applications Emirates

vMonitor

TM

Creating the Digital Oilfield

vMonitor

Union Chlorine The Department of Economic Development - Abu Dhabi (DEDAD) and the Higher Corporation for Specialised Economic Zones (HCSEZ) sponsored the partnership agreement between Horizon Energy LLC and Oman Chlorine, a Muscat listed company for the establishment and operation of Union Chlorine on 12 November 2013, in the presence of Mohammed Omar Abdullah, Undersecretary of the Department; Sheikh Mohammed Abdullah Ali Al Qatabi, Ambassador of the Sultanate of Oman; Giorgio Starace, the Italian Ambassador to the UAE. The Abu Dhabi based facility plans to produce 70 tonnes per day of caustic soda, hydrochloric acid and sodium hypochlorite. Commercial production should begin in the third quarter of 2015. It is a US $70M chlorine-alkali plant in ICAD Region 3 in Abu Dhabi, designed to cater to the Oil & Gas sector in the Gulf.

Union Chlorine

www.horizonenergy.ae

INTERVIEW

technologies that has a proven track record of adding reserves. Since it was first implemented in the US in 1972, CO2 EOR has become a proven technology, and has contributed billions of barrels of oil production. Moreover, the advances seen in emerging EOR technologies – such as chemical EOR – look likely to lead to the expansion of the new technique to other parts of the world.

With implementation of both proven and emerging EOR technologies, extraction of additional oil reserves – including those from particularly complex fields – will be possible. This will eventually lead to either higher production capacities and/or longer production plateaus, leading to higher recovery rates overall.

Q

What progress has been made with the testing of shale formations in the UAE?

ADNOC has conducted its first test well aimed at determining whether the hydraulic fracturing technology behind the US shale gas boom could also underpin unconventional UAE gas production, helping raise overall supply. The tests were conducted in partnership with 60 per cent-owned ADNOC unit ADCO. The partners used multi-stage acidic fracturing in an effort to produce commercial gas flows from the almost impermeable limestone and dolomite of Abu Dhabi’s Diyab formation, which is believed to be the source rock from which oil and gas migrated into the emirate’s biggest oilfields. The treatment was successful in physically and chemically opening channels in the dense rock through which gas could flow at a sustained rate into the well bore.

This is very good news, as it is a very extensive formation and easy to find almost everywhere.

A

Q

How do you feel about the expansion of UAE firms outside the country?

The expansion of UAE firms beyond our national border is not surprising, as there are plenty of opportunities where they can add value through their overseas activity.

We have a history of solid investment in oil and gas projects at home. We now see some companies move from being an investor to being a fully fledged operator, including Mubadala Petroleum, IPIC, TAQA, Dana Gas and others.

UAE companies today manage assets and operations at

A

all stages of the value chain with locations around the globe. They continue to grow their capabilities, combining significant operational and technical experience and expertise. These qualities build on their strong commercial skills and the partnership-driven approach that has been central to our business from the outset.

Q

What can private investors contribute to the UAE oil and gas sector?

The UAE, as a major world oil producer, maintains a free market economy with minimal restrictions on private-sector activities, international trade and capital movements. Higher oil prices clearly enable increased government spending.

The UAE has a history of welcoming private-sector investment into its upstream oil and gas exploration and production sector. Abu Dhabi was the only OPEC member not to nationalise the holdings of foreign investors during the wave of nationalisation that swept the global oil and gas industry in the mid 1970s, and it continues to benefit from high levels of private-sector investment.

For example, in the new bidding round for our major onshore fields, ADCO invited new companies as well as the old international shareholders [BP, Exxon, Shell and Total], which gives a strong sign that we believe new private investors can make an important contribution.

A

Q

How are renewable schemes progressing in the country?

Renewable energy is an integral part of the UAE’s energy mix, and supports the diversification and sustainability of the UAE economy. The UAE federal government is targeting a 24% capacity share for renewable energy by 2021, and is currently developing an energy policy and strategy to support the deployment of renewable energy in the UAE. The Abu Dhabi Government, through Masdar, is leading the renewable energy technology deployment by focusing on installing new capacity to bring the total up to Abu Dhabi’s renewable target by 2020. In the case of Dubai, state utility DEWA installed a 13MW [megawatt] photovoltaic project in 2013, and in 2014 released a tender for a 100MW plant to be installed by 2017. Dubai is targeting 1GW [gigawatt] of solar by 2030.

A

UNITED ARAB EMIRATES – GROWTH OF A NATION 111

KARIM SAHIB/AFP/GETTY IMAGES

OIL AND GAS

UNITED ARAB EMIRATES – GROWTH OF A NATION 112

OIL AND GAS

Abundant resources in a mature oil province The United Arab Emirates possesses the world’s seventh largest proven reserves of oil and gas, and demand continues to grow

The Gulf Petroleum storage terminal on the Fujairah coast. The Habshan-toFujairah pipeline allows the UAE to export oil to the Arabian Gulf without the need to ship via the busy and sensitive Straits of Hormuz

THE UNITED ARAB EMIRATES IS THE world’s fifth biggest oil exporter, and is a member of the Organization of Petroleum Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GECF). It earned around $48 billion from oil exports in the first half of 2013, maintaining income at 2012’s annual level of around $100 billion, the highest year on record, according to US Energy Information Administration (EIA) statistics, and representing more than 10 per cent of OPEC’s total income. Overall, the hydrocarbon economy accounts for about 80 per cent of government revenues, 40 per cent of gross domestic product (GDP) and well over half of the country’s goods exports, according to the International Monetary Fund.

The UAE holds the seventh largest proven (commercially recoverable) reserves of oil in the world at an official level of 97.8 billion barrels, or about six per cent of the global total.

Total hydrocarbon reserves are estimated at 138 billion barrels of oil equivalent (boe) in BP’s latest World Statistical Review. While the country is seen as a mature oil province and new discoveries are rare, the extensive use of enhanced oil recovery (EOR) techniques has allowed the UAE to produce oil while maintaining its recoverable oil reserve levels – which have not officially changed since 2004, when they were increased from 80 billion barrels.

This flexibility extends to production, where the country has been able to maintain a supply cushion, second only to that of Saudi Arabia. This allows it to vary production alongside its OPEC partners in response to the market – there was a steady rise in production up to 2007, when prices fell back slightly in the face of lower global demand and UAE output was reduced accordingly. That flexibility is hugely important to global markets and the global financial system, helping to ensure stability.

The vast majority of UAE production and 94 per cent of reserves are located in Abu Dhabi. Given this dominance, Abu Dhabi’s Supreme Petroleum Council (SPC), chaired

by Sheikh Khalifa bin Zayed Al Nahyan, president of the UAE and ruler of Abu Dhabi, has the greatest say in determining oil policy. The other six emirates produce only small volumes, led by Dubai with around 60,000boe per day

UNITED ARAB EMIRATES – GROWTH OF A NATION 113

OIL AND GAS

(boepd), from four billion barrels of reserves. Each emirate regulates the oil industry within its own borders.

The current relatively steady level of crude prices, at well over $100 per barrel, is encouraging the SPC to expand oil production capacity to 3.7 million barrels per day (mbpd) by 2017, while rapidly rising domestic power demand is driving expansion of gas production. Crude output stood at 2.8mbpd in March 2014 – or 9.3 per cent of oil supplied by OPEC, according to data from the International Energy Agency (IEA).

The expansion will require “a lot of efficiency, technology and resources”, according to Mohammed Al Shamma, vice president of public relations at the Abu Dhabi Marine Operating Company (ADMA-OPCO). Of the estimated 315 onshore and offshore projects currently proposed or under development in the oil and gas sector in the Middle East and North Africa region – worth a total potential investment of $573.5 billion – the highest level of contracting activity has been in the UAE, where 58 out of 185 major contracts have been awarded since 2010, according to EICDataStream, the Energy Industries Council’s projects-tracking database.

2010

2011

2012

2013

2014

2009

2010

2011

2012

2013

encouraging the development of alternative energy sources, especially UAE oil and gas statistics nuclear and solar, in order to maintain net exports. The UAE is increasing refining capacity to over one mbpd Proven reserves of natural gas by the end of 2014, with more trillion cubic feet expansions on the way.

The UAE also holds the world’s 300 seventh largest proven reserves of natural gas, at just over 215 trillion 250 228 214 215 215 215 cubic feet (tcf). However, it is less 200 successful as a producer – partly due to the sour, corrosive nature of much 150 of the gas – ranking only 19th in the world, with output of around 1.9tcf 100 of dry gas in 2012. While Abu Dhabi has long been an exporter of liquefied 50 natural gas (LNG), the UAE became a net gas importer in 2008, and with annual demand growth at over five per cent, efforts are being made to raise domestic production and replace Total oil supply gas used for field injection, so it can million barrels per day be freed up for power generation, replacement of imports or other more 3.5 profitable uses. Here again, recent 3.213 3.230 rapid technological advances in sour 3.25 3.088 gas processing, including automation 3 and advanced materials, could provide 2.795 2.813 the technical capability to speed up 2.75 and expand potential plans, while 2.5 the need to use gas is also reduced through development of alternative 2.25 injection fluids and techniques.

2 Boosting oil recovery In the meantime, the UAE is Rapidly evolving upstream technology importing gas from neighbouring could expand the opportunities for Qatar via the Dolphin gas pipeline, increasing the proportion of oil and plans LNG imports through the recovered in the country over the next new EmiratesLNG terminal currently Source: US Energy Information Administration (2013-14) few years. Alongside new reservoir under construction in Sharjah. Plans modelling capabilities, including for exploration are not particularly directional drilling and 4D seismic, the implementation of active, although pre-Khuff gas fields are potential targets. chemical or even microbial EOR advances could see reserves Expensive LNG imports, and more development of highrise further, or at least enable production companies to cost sour and perhaps tight or shale gas reservoirs, are keep pace with the depletion of increasingly mature fields. increasing calls to raise domestic prices to balance supply Fluids used in hydraulic fracturing may also be applicable and demand, and relieve pressure on state coffers. to EOR, while extensive shale deposits in the country could Abu Dhabi bases most upstream contract structures eventually add to recoverable reserves and output as well. on long-term production-sharing agreements (PSAs) While production is continuing to rise, so are recovery between state-run Abu Dhabi National Oil Company costs – albeit from very low levels – in response to the (ADNOC) and private companies. While other major oil increasingly complex and technical nature of the process. producers such as Saudi Arabia and Venezuela have fully Higher costs and rapidly rising domestic oil and gas nationalised their oil industries, Abu Dhabi has increased consumption – the country consumed 620,000bpd of oil its share while continuing to work with its private partners, in 2012, with annual growth of over five per cent – are although this year they have been temporarily absent from UNITED ARAB EMIRATES – GROWTH OF A NATION 114

OIL AND GAS

KEVPIX/ALAMY

Abu Dhabi’s main onshore concession, Abu Dhabi Company for Onshore Oil Operations (ADCO). Dubai and Sharjah predominantly have service contracts to manage declining production from their mature fields.

Competition for concessions Until 2014, Abu Dhabi produced oil from its onshore fields under 75-year concession deals with ExxonMobil, Shell, Total, BP and Portugal’s Partex Oil & Gas, in which the five foreign partners held a 40 per cent combined stake. ADNOC is expected to re-award these concessions in 2014, with the legacy holders competing for stakes with several new entrants. Abu Dhabi is looking to attract new partners in addition to the established super majors that helped the country launch its petroleum industry decades ago, reflecting a changing world. It has already brought in Japanese companies, Germany’s Wintershall, Austria’s OMV, and Korea National Oil Corporation (KNOC), and is considering advances from Norway’s Statoil and others.

Potentially the most important new partnership of all is a joint venture between ADNOC and China’s state-owned China National Petroleum Corporation (CNPC). Named Al Yasat, it will be 40 per cent owned

by CNPC. Al Yasat is expected to be awarded riskier, less developed assets, rather than established high-production concession areas. Meanwhile ADNOC has voiced an interest in investing in China’s domestic petrochemical sector.

One such undeveloped asset is the Ghasha field, which lies in Abu Dhabi in an area with three overlapping concessions. So far, its five tcf of natural gas have been left undeveloped. According to a 2003 estimate by the American Association of Petroleum Geologists, Ghasha also holds 1.1 billion barrels of recoverable oil. Both CNPC and Statoil have expressed interest in developing the field.

Away from Abu Dhabi, interest is growing in Dubai, where the sustained high price of crude makes its hard-to-access deposits more economical to exploit.

Production in the emirate peaked at 400,000bpd in the 1990s, before declining to current levels, but reserves remain substantial. The Dubai Supreme Council of Energy

As 75-year concession deals with the established oil majors come to an end, Abu Dhabi is seeking a broader range of partners to join it in exploiting the emirate’s reserves

Abu Dhabi is offering a new crude stream called Das, which is a blend of two existing streams (DSCE) oversees the development and coordination of Dubai’s energy policy, and has responsibility for ensuring adequate and sustainable access to energy resources.

The UAE has a well-developed domestic pipeline network, including the $4.2 billion, 1.5mbpd Habshan-toFujairah export pipeline, known as the Abu Dhabi Crude Oil Pipeline (ADCOP). The 230-mile line is expected to expand to 1.8mbpd by 2017, and provides the UAE with the ability

to export a significant portion of its output without the need to ship oil through the Straits of Hormuz – the busy and sensitive exit to the Arabian Gulf. Around 97 per cent of the UAE’s crude exports head for Asia, and Abu Dhabi is by far the biggest supplier of crude oil to Japan.

The UAE has several crude streams, the most important of which is Murban. A light, low-sulphur or sweet crude that is the country’s primary export stream, at about 1.5mbpd, Murban is exported from the Jebel Dhanna terminal. This year, Abu Dhabi is offering a new crude stream called Das, which is a blend of two existing streams: the Umm Shaif and Lower Zakum crude streams. ADNOC currently produces 350,000bpd of the Umm Shaif and 280,000bpd of the Zakum crude, which are exported from a terminal on Das Island. Most exports are tied up in long-term evergreen contracts, adding to Asian buyers’ security of supply.

UAE oil and gas companies are also active outside the country. In Abu Dhabi, three government-controlled entities, Mubadala Development Company, the Abu Dhabi National Energy Company (also known as TAQA), and International Petroleum Investment Company (IPIC) are the main vehicles for such enterprise. Mubadala produces about 400,000boepd, mostly in Oman and South-East Asia, while TAQA produces about 130,000boepd, largely from the North Sea. IPIC, formed as a strategic investor in the energy and related sectors across the globe, has investments in more than 18 leading companies, mostly in refining and petrochemicals, including 24.9 per cent of Austria’s OMV.

UNITED ARAB EMIRATES – GROWTH OF A NATION 115

History, People & Innovation...

Driving our Future...

Abu Dhabi National Oil Company (ADNOC) www.adnoc.ae

Abu Dhabi National Oil Company (ADNOC)

Over the past few years, significant

was established in 1971 to operate in all

achievements have been made in the expansion

then, has steadily broadened its activity,

demand from industry gas users and gas injection

areas of the oil and gas industry and, since establishing companies and subsidiaries

and creating an integrated oil and gas industry in the fields of exploration and production, support services, oil refining and gas

processing, chemical and petrochemical, maritime transportation and refined products distribution.

The Supreme Petroleum Council (SPC),

and development of gas fields to meet increased requirements in order to enhance the oil and

condensate recovery from the producing fields.

ADNOC is committed to sustainable development, ensuring a harmonious balance between people’s needs and Earth’s resources, while its track record in HSE sets the standard for the rest of the Arabian Gulf.

Giving top priority to education, ADNOC

chaired by H.H. Sheikh Khalifa bin Zayed

established a number of institutions that train

of Abu Dhabi, formulates and oversees the

sector. The Petroleum Institute, the ADNOC

Al–Nahyan, President of the UAE and Ruler implementation of Abu Dhabi petroleum policies.

Over the past four decades, ADNOC has

expanded its business activities, enhanced its competitive position and managed to become

and develop a qualified UAE cadre for the energy Technical Institute, the Achievers’ Oasis and the Scholarship programs are just a few examples of ADNOC’s educational projects.

ADNOC has 16 subsidiary companies working

one of the world’s leading oil companies with

in various fields of the oil, gas and petrochemical

downstream activities, including transportation,

and services. They include ADCO, ADMA-

substantial business interests in upstream and shipping, marketing and distribution.

ADNOC’s efforts in the exploration and

production field have concentrated on

assessing undiscovered reserves and optimizing hydrocarbon recovery by improving reservoir management.

industry, as well as crude oil and gas transport

OPCO, GASCO, ADGAS, ZADCO, TAKREER,

NDC, ESNAAD, IRSHAD, FERTIL, BOROUGE, NGSCO-ADNATCO, ADNOC Distribution,

ELIXIER, Abu Dhabi Gas Development Company Ltd. (Al Hosn Gas) and Al Dhafra Petroleum Operations Company.

OIL AND GAS

Understanding the major operators An overview of the most significant players in oil and gas production in the United Arab Emirates

THE ABU DHABI NATIONAL OIL COMPANY (ADNOC) was established in 1971 to operate in all areas of the oil and gas industry. Its activities are now conducted by 15 subsidiaries across the oil, gas and petrochemical sectors. These include key concession area operators the Abu Dhabi Company for Onshore Oil Operations (ADCO), the Abu Dhabi Marine Operating Company (ADMA-OPCO) and the Zakum Development Company (ZADCO).

ADNOC controls the majority of the United Arab Emirates’ oil resources in partnership with a few large international oil companies under long-term concessions.

The most important of these is the onshore ADCO operation, which is now 100 per cent owned by ADNOC, following the expiry of a 75-year concession in 2014.

ADCO produces mainly from six oilfields: Asab, Sahil, Shah, Bab, Bu Hasa and North-East Bab (comprising Dabbiya, Rumaitha and Shanayel). It produces roughly 1.6 million barrels per day (mbpd). The Murban crude stream is the UAE’s main export blend.

When the concession is re-awarded in 2014, Abu Dhabi is not expected to improve the terms, as it did with its offshore ZADCO partners in 2013. The legacy partners are not guaranteed a stake, and will have to compete through auction with new arrivals. These include Occidental from the United States, Italy’s ENI, Norway’s Statoil and Denmark’s Maersk, which were all invited. Additional pre-qualified companies reportedly include Russia’s Rosneft, Korea National Oil Corporation (KNOC), Japan’s Inpex, and China National Petroleum Company (CNPC). Of the four supermajors who began the fields, all but Exxon have placed bids to regain a chance to operate slices of the onshore acreage.

The largest US and European oil companies have a “good chance” of winning renewals for Abu Dhabi crude oil concessions, according to UAE Minister of Energy Suhail Al Mazrouei. Their intimate knowledge of the geology and field operations, as well as their global leadership in new enhanced oil recovery (EOR) techniques, put them in a strong position. The majors also have ties via their global marketing and trading networks, which Abu Dhabi has relied on in the past, and has continued to do so under a

Abu Dhabi crude oil concessions are said to have a “good chance” of going to the largest US and European firms

UNITED ARAB EMIRATES – GROWTH OF A NATION 118

ANDREW HOLT/OCEAN/CORBIS

OIL AND GAS

UNITED ARAB EMIRATES – GROWTH OF A NATION 119

OIL AND GAS

temporary agreement until June 2014. While questions remain over the technical ability of some of the Asian national oil companies to produce at depleting fields, they do offer growing markets and political ties to the world’s centres of economic growth.

A far-reaching decision The Supreme Petroleum Council’s (SPC) decision on the ADCO concession promises to be its most far-reaching in decades. It will not only determine the future of Abu Dhabi’s major onshore oil resources but will also influence the renewal or restructuring of the offshore concession held

Experts believe that ADCO is unlikely to raise its production payments from $1 per barrel

by ADMA-OPCO in 2018. This concession – a joint venture including ADNOC, the United Kingdom’s BP, France’s Total and Japan’s Jodco – includes the 600,000bpd Umm Shaif and Lower Zakum fields. It is also bringing on-stream the new Satah Al Razboot (SARB), Nasr and Umm Lulu fields.

The other main offshore concession, comprising the giant Upper Zakum field, is operated by ZADCO and 60 per cent owned by ADNOC as operator, while Exxon has 28 per cent and INPEX 12 per cent. Exxon and INPEX recently negotiated longer and better-paid terms on the concession, adding an extra 15 years up to the end of 2041, and raising the amount the partners get paid from $1 to $2.85 a barrel, says industry publication International Oil Daily. Experts believe that ADCO, however, is unlikely to raise its production payments from $1 per barrel, which remains the norm among Abu Dhabi oil contracts, and it is unclear whether this norm or the ADCO decision due later in 2014 will be more of an indicator of what kind of out-turn to expect from ADMA-OPCO in 2018.

The third, much smaller, offshore ADNOC-led operating concession is the Abu Dhabi Oil Company (ADOC), a JapanUAE joint venture established in 1968. It was awarded a 45-year concession, and oil was found in 1969 on the island of Mubarraz, which came on-stream in 1973.

One concession without the involvement of ADNOC is the Total-led Abu Al Bukhoosh Oil Company, which was formed in 1973 to develop the offshore Abu Al Bukhoosh oilfield, and is currently held 75 per cent by Total and 25 per cent by Japan Indonesia Petroleum. Production from Abu Al Bukhoosh peaked in 1976 at 81,000bpd and is currently running between 40,000 and 50,000bpd. Total is using this concession to test out new EOR techniques, which can then be applied to the larger on- and offshore fields that are under ADNOC control.

Smaller operators include the Bunduq Oil Company, owned by a Japanese consortium, United Petroleum

ADNOC produces about 1.6 million barrels of oil per day HE Suhail bin Mohammed Faraj Faris Al Mazrouei was appointed UAE minister of energy in 2013

G P BOWATER/ALAMY

FAISAL AL NASSER /REUTERS

UNITED ARAB EMIRATES – GROWTH OF A NATION 120

RAJ SINGH/ALAMY

OIL AND GAS

Development Company, with 97bpd and BP with the remainder. The company operates an offshore oil and gas field that straddles the maritime border between Abu Dhabi and Qatar, which the two countries have agreed to share equally. As with the Total-led concession, the field has been a proving ground for technological advances, with water injection since 1983 to maintain reservoir pressure.

Since 2006, the associated sour gas has been reinjected for environmental protection and EOR. Production is thought to be around 15,000–20,000bpd.

Other operators include Dubai Petroleum, the government entity that operates offshore fields in Dubai.

Dubai produces 100,000 barrels of oil equivalent per day (boepd) from four separate fields, the older and more abundant Fateh and Southwest Fateh oilfields, along with the newer Falah and Rashid fields. The onshore Margham condensate field in Dubai is now run by the governmentowned Dubai Margham Establishment.

Sharjah’s only major oilfield is the Mubarak field, which was operated by Crescent Petroleum until it returned the concession to state control in 2009. Crescent was the first regional, independent, privately owned petroleum company in the region. It remains focused on energy opportunities in the Arabian Gulf, particularly on the development, marketing and utilisation of natural gas assets.

Mid- and downstream operators include the Abu Dhabi Gas Industries Limited Company (GASCO), which was created as a joint venture between ADNOC, Shell, Total and

The decision on the ADCO concession this year is likely to have implications for subsequent Abu Dhabi oil contracts

Partex. It oversees the processing of Abu Dhabi’s onshore natural gas, including any associated gas recovered from onshore oil operations. Another important company in Abu Dhabi’s natural gas sector is Abu Dhabi Gas Liquefaction (ADGAS), which controls the production and export of the emirate’s liquefied natural gas (LNG) and liquefied petroleum gas (LPG).

Liquefied natural gas The UAE set up its first LNG plant in 1977 on Das Island, operated by ADGAS. The plant is run on associated natural gas from the Umm Shaif, Lower Zakum and Bunduq oilfields. The National Gas Shipping Company (NGSCO) handles all shipments from Das Island, with a fleet of eight LNG carriers. About 85 per cent of the LNG produced at Das Island is destined for Japan as fuel for Tokyo Electric Power Company’s (TEPCO) gas-fired power plants.

An important operator in Abu Dhabi’s upstream gas industry is the Abu Dhabi Gas Development Company (Al Hosn Gas), which is responsible for the development of the sour-gas reservoirs in the Emirate’s major Shah gas field. The completion date for this project slipped recently from the end of 2014 to early 2015. Al Hosn Gas is a joint venture between ADNOC with 60 per cent, and Occidental Petroleum with 40 per cent. In Dubai, the Dubai Natural Gas Company (DUGAS) is responsible for overseeing the engineering, construction, management and operation of Dubai’s natural gas infrastructure.

UNITED ARAB EMIRATES – GROWTH OF A NATION 121

ADVERTISEMENT

Staffing protocols and accelerated competency training in emerging markets Kevin Smith Executive Director, KBC Advanced Technologies PLC ksmith@kbcat.com A challenge to emerging and rapidly developing oil, gas and petrochemical markets is the development and retention of local talent in engineering, operations and maintenance. This determines success or failure in all areas of company operations, from project development to facility operations, and the ability of companies to be self-sustaining (reducing dependence on expatriate workforce and external consultants). Two further considerations for some emerging and developing markets are social commitments made to create jobs for local citizens (directly bearing on the facility competitive advantage) and the demographic shift to a large number of younger employees entering the workforce while experienced personnel (often expatriate) leave.

Effectively managing this challenge requires companies in emerging and developing markets to balance learning from effective, established practices developed by their Organisation for Economic Co-operation and Development (OECD) counterparts, while simultaneously addressing unique characteristics and nuances of their local market.

Here, we discuss staffing protocols and accelerated competency development to effectively deal with the balance.

Staffing protocol OECD organisational staffing levels should be set to support normal facility operations. For companies in emerging and developing markets, a different staffing view needs to exist. The critical focus is ensuring all employees are effectively utilised in performing meaningful work activities. This shift in focus, while subtle, is important as the emphasis changes from minimising the operational labour costs to maximising the value added by each employee.

Mark Anderson Partner, KBC Advanced Technologies, Inc. manderson@kbcat.com The following stepwise process can be used to determine effective staffing protocols for an organisation with a business goal tied to maximising employee value added.

By taking a different view of effective staffing practices, companies in emerging markets can better find the balance between their necessary higher staffing levels and the need to ensure efficiency in work execution. The key behind this approach is ensuring that all employees have meaningful, value-added work with

Define work processes associated with managing day-to-day business of the facility.

Identify additional value-added activities to better support work processes and strategic improvement, including needs associated with staff development.

Organisational structure design or redesign to best support all requirements and value-added activities. This design effort encompasses three main elements of the organisation: core operations and maintenance; work processes and facility performance optimisation; and strategic improvement. Designing around these three organisational elements will help ensure that effective use is made of higher staffing levels.

It is important to be able to evaluate the effectiveness of the organisation. To accomplish long-term effectiveness, an organisation-wide key performance indicator (KPI) tree should be developed that links work-process-level performance indicators to facility-level business KPIs. Once developed, this KPI tree will provide clear and timely feedback regarding the effectiveness of the new organisation and allow for necessary corrections to be made, keeping things working effectively.

ADVERTISEMENT

minimal overlap of duties. Further, ensuring that the organisational design supports the development of competent, capable employees will allow companies to maximise the value of each employee.

Providing more interesting work and increased development opportunities will also aid in employee retention.

Accelerated competency development One way to promote the efficient use of an employee base is to ensure they are competent in their positions. While seemingly straightforward, this can be challenging for an organisation faced with assimilating a large number of new employees in a short period of time and/or dealing with a high turnover rate. Couple this with the prospect of additional facilities or capacities being added in the near future and the task can seem overwhelming. Essential to accelerated employee competency development is structuring the development programme to utilise blended learning methods that tap into leading practices in adult knowledge retention.

Traditional approaches to employee training focus on blending classroom training, computer-based training and on-the-job training delivery methods to provide employees with the competencies needed to perform their job duties.

However, most programmes use these different delivery methods in a passive form. This means the focus is on teaching the trainee, not on facilitating learning.

Classic adult learning theory tells us that a passive approach to training facilitates retention rates averaging 30 per cent.

These same theories tell us that more active modes of learning (for example, active discussions, delivering presentations, participating in simulation exercises, actual job performance, and so on) result in retention rates of 70 per cent to 100 per cent. The question becomes: how does an organisation effectively leverage these theories to accelerate the development of employees, while managing the cost and time of training?

Active, blended learning that engages the employee in a truly experiential development process is the answer.

The key to this approach is to leverage a variety of delivery methods utilising their most appropriate application and integrating experiential learning exercises along with active problem-solving exercises into the overall development path. The following is a description of the appropriate application of the various delivery mechanisms: • Self-reading and computer-based training: to provide trainees with a basic understanding of pertinent information and operational descriptions.

• Instructor-led training: to provide trainees with a working understanding of unit and equipment operations and basic principles. This will also help reinforce the understanding gained by trainees through self-paced training.

The conversion of retained knowledge into true competence • Structured on-the-job training: to provide trainees with training on job procedures and routine practices.

• Information-gathering and assimilation exercises: these exercises force the trainee to actively gather basic operational information and then assimilate that information into practical application scenarios.

• Discussion-based situational training: to stimulate trainee thinking in the application of unit understanding to real-world situations and reinforce basic problem-solving skills. This training mechanism can also be used to disseminate experiential knowledge from experienced personnel to newer employees.

• Simulated situational training: to stimulate trainee thinking in the application of unit understanding to real-world situations, and reinforce basic problem-solving skills. This training mechanism can also be used to disseminate experiential knowledge from experienced personnel to newer employees. Further, this training allows trainees to apply their training to real-world situations in a simulated

environment (for example, operator training simulators and red tag drills).

The key to converting this blended learning approach into an accelerated development programme lies in how the programme is structured to combine the various delivery methods to maximise not just knowledge retention, but also conversion of that retained knowledge into true competence.

Conclusion The challenges faced by companies in emerging markets require a different approach to organisational staffing, including workforce development and retention, than the path taken by many global independent oil and chemical companies. By utilising the concepts described in this paper, companies can create overall staffing strategies that incorporate both alternative organisational designs and accelerated competency development to maximise the value added by their employees. When combined with the low labour costs in emerging markets, this enhanced value can create a significant competitive advantage by allowing organisations to effectively drive a higher number of operational improvement projects, while still effectively managing day-to-day operational activities. Further, by creating an organisational structure and progression path that maintains employee interest and creates ongoing development opportunities, improvements can also be seen in employee retention.

KBC is a leading consultancy and software provider to the global hydrocarbon processing industry. With over 30 years’ experience, KBC combines industry-leading technology with experienced engineers and operations personnel using robust methodologies to create personalised, sustainable solutions for its clients.

Visit www.kbcat.com

OIL AND GAS

The Government of the UAE is embracing new ways of extracting oil from the country’s reserves

UNITED ARAB EMIRATES – GROWTH OF A NATION 124

OIL AND GAS

Boosting the recovery factor The United Arab Emirates is leading the way in new technologies designed to facilitate an increase in oil recovery

upon to maintain production. Consequently, the UAE is focusing its efforts on increasing production using enhanced oil recovery (EOR) techniques to raise the extraction rates of the country’s mature oilfields.

The UAE is one of the world’s leaders in the use of natural gas in EOR, reinjecting 26 per cent of gross natural gas production from 2003-12 into its oilfields as part of EOR projects. But with domestic natural gas

GREENSHOOTS COMMUNICATIONS/ALAMY

MOST OF THE UNITED ARAB EMIRATES’ oilfields were discovered in the 1960s and ’70s, making it a relatively mature oil-producing region. Today, major new oil discoveries are thought unlikely, but vast quantities of unrecovered oil from those mature fields are still in the ground.

While UAE fields remain viable with an abundance of oil, natural reservoir pressure can no longer be relied

UNITED ARAB EMIRATES – GROWTH OF A NATION 125

demand rising quickly, to feed an expanding gas-fired power generation programme, the government plans to replace it with alternative fluids or techniques where possible. The first CO2 EOR pilot agreement was signed in 2008 – a first for the Gulf Cooperation Council (GCC) region – and much of the emphasis is now on replacing gas use, as well as further increasing oil output.

Steady and firm oil prices are helping to increase the commercial viability of EOR, which raises the cost of recovery. “The intention is to improve the recovery factor in Abu Dhabi to 70 per cent. This is our ultimate target,” Ali Al Jarwan, CEO of the Abu Dhabi Marine Operating Company (ADMA-OPCO), told The National newspaper.

The focus on EOR should give experienced Western oil companies an edge over Asian newcomers in the run-up to concession renewals, as they are the ones with the skills, equipment and experience of advanced EOR techniques, as well as intimate knowledge of the fields themselves.

At its onshore fields, Abu Dhabi National Oil Company (ADNOC) has now tested the use of CO2, notably in the Rumaitha sector of North-East Bab. The Bab field – the UAE’s first commercial field – is at the centre of Abu Dhabi’s CO2 EOR plans, with an anticipated 800,000 tonnes per year to be supplied from a nearby steel plant for reinjection to aid in oil recovery – a global first. Plans to collect waste CO2 from other industrial plants are also under way.

This should help onshore operator ADCO (the Abu Dhabi Company for Onshore Oil Operations) add a combined total of 200,000 barrels per day (bpd) from the Bu Hasa field, bringing production there up to 750,000bpd, with a target completion date of 2014.

Expected increases

JB-2078/ALAMY

OIL AND GAS

Improving capability in areas such as directional drilling, 3D and 4D seismic imaging, and complex well designs demands specialist skills and experience

Since 2009, ADCO has been developing an integrated project to increase crude output from the Sahil, Asab and Shah (SAS) oilfields by a combined 60,000bpd to 455,000bpd by 2016.

The Bida Al Qemzan field is also expected to increase production by 75,000bpd to 300,000 bpd by 2016. In

The UAE is searching for the best global EOR performers, as well as established partners, to help it maximise recovery total, ADCO plans to increase oil production capacity by 400,000bpd to 1.8 million barrels per day (mbpd) by 2017.

Supermajor Total has achieved recovery rates of above 50 per cent at the offshore Abu Al Bukhoosh field, using chemical EOR. Production from Abu Al Bukhoosh peaked in 1976 at 81,000bpd and now runs at between 40,000 and 50,000bpd. Total operates and holds a 75 per cent stake in the field, which is a testing ground for advanced technology

that can then be applied to the country’s larger fields.

Other pioneering EOR techniques include that of Elixier – a joint venture between ADNOC and Linde – which produces nitrogen from air to replace 0.3-0.6 billion cubic feet (bcf) per day of natural gas previously used for condensate recovery in the Habshan field.

ADMA-OPCO is also exploring the use of CO2 to increase recovery rates. Al Jarwan said: “There is research at ADMA in how to do CO2 injection offshore. It is a feasibility study. It will develop later on into a pilot and then [go] full scale – but this is really long-term.”

As part of a 10-year plan, the offshore operator is seeking to boost production levels at the Umm Shaif field to 280,000bpd by 2016, and at the Lower Zakum field from 300,000 to 425,000bpd by 2019.

Also in the upstream sector, ADNOC and ADCO have carried out initial tests for shale oil and gas potential at the extensive onshore Diyab formation – the source rock for many of Abu Dhabi’s conventional fields. In addition, Dubai Petroleum has commissioned an onshore study of potential shale fields that could be exploited through the use of hydraulic fracturing (fracking) techniques.

The UAE is searching for the best global EOR performers, as well as established partners, to help it maximise recovery.

Statoil was invited to pre-qualify to bid for Abu Dhabi’s main offshore concession on the basis of its long-term recovery rate in Norway of 60 per cent, which is getting close to the 70 per cent benchmark endorsed by ADMA-OPCO’s Al Jarwan. Besides fiscal terms, Statoil says the duration of the concession is important, with a long time horizon critical in pursuing a high recovery rate.

UNITED ARAB EMIRATES – GROWTH OF A NATION 126

CHRISTINE OSBORNE PICTURES/ALAMY

OIL AND GAS

Shell, too, is interested in assisting with advanced EOR. “We have recently looked to see if there are EOR opportunities in the Emirates,” Matthias Bichsel, Shell’s executive director of projects and technology, told The National in an interview. “We have people out there in the field that are continuously demonstrating what technology offerings we have.”

EOR is not just about the injection of fluids, but also involves improved capabilities in the areas of 3D and 4D seismic imaging, geological modelling, extended directional drilling and complex well designs, among other areas. All of these add complexity and cost to recovery, and require increasingly specialised skills and expertise.

A dredger reclaiming land in the Gulf off Dubai. The UZ750 project involves the construction of four artificial islands in Upper Zakum, the UAE’s largest oilfield

Upper Zakum project Abu Dhabi plans to spend as much as $14 billion to boost production at the UAE’s largest oilfield, Upper Zakum, which has reserves estimated at around 50 billion barrels, and production of 585,000bpd from about 450 wells. Located 84km offshore the north-west of Abu Dhabi, Upper Zakum is the second-largest offshore oilfield and the fourth-largest oilfield in the world. Its operator, Zakum Development Company (ZADCO), is the first ADNOC subsidiary to officially target a 70 per cent recovery rate, and its expansion project is a core part of Abu Dhabi’s target of expanding production to 3.5mbpd by 2017.

The expansion project requires relatively challenging techniques, ranging from long-range horizontal drilling to water flooding. The partners are targeting a rise in production to 750,000bpd by 2017 and are considering raising that to a million bpd by 2024. Known as the UZ750 project, it is being implemented in two phases, involving the construction of four artificial islands comprising a central complex that will house the processing facilities, and the north, south and west satellite platforms. National Petroleum Construction Company (NPCC) and Technip are carrying out the first phase, which is expected to add 100,000bpd and involve the development of offshore processing facilities, due for completion in 2015.

The second phase is being carried out by Petrofac Emirates, through the company’s joint venture with Mubadala Petroleum and Daewoo Shipbuilding & Marine Engineering, under a contract worth approximately $3.7 billion. It is focused on the offshore islands, which are due to start operating in 2016. The four islands are being constructed out of sand and rock in water depths ranging between five and 15 metres. New technology is being used, including extended-reach drilling (ERD), which enables the targeting of reservoirs at a great distance from the drill site.

Another innovative technology being used is maximum reservoir contact (MRC), which reduces the number of new wells, and unlocks tighter areas in the reservoir.

UNITED ARAB EMIRATES – GROWTH OF A NATION 127

OIL AND GAS

Emirates National Oil Company’s (ENOC) lubricants and grease manufacturing plant in Fujairah. ENOC recently expanded its Fujairah oil storage facility by 600,000 cubic metres

UNITED ARAB EMIRATES – GROWTH OF A NATION 128

OIL AND GAS

A broad spectrum of oil and gas projects A large number of on- and offshore oil and gas developments are taking place in the United Arab Emirates, with innovation playing an important role

processing more of its crude production to add value to exports. In addition to the major Ruwais expansion in Abu Dhabi, Emirates National Oil Company (ENOC) announced plans in June 2012 to boost capacity at the Jebel Ali refinery off the coast of Dubai by 20,000bpd, as part of a wider port-expansion project. The UAE and neighbouring Oman also plan a jointly operated 200,000bpd refinery, while a deal has been signed with China Sonangol to build a refinery in Dubai.

International Petroleum Investment Company (IPIC) plans to invest $3 billion in a new Fujairah refining complex, with a targeted capacity of 250,000bpd.

Natural gas development The development of natural gas includes several recent and ongoing projects: the Onshore Gas Development (OGD), Integrated Gas Development (IGD) and Offshore Associated Gas (OAG) projects. The OGD project includes plans to boost gas production from the Bab field from 1.2 billion cubic feet per day (bcfd) to in excess of two bcfd by 2015 and nearly 2.5 bcfd by 2018.

The $10 billion IGD project, meanwhile, is being led

by Abu Dhabi Gas Industries (GASCO), Abu Dhabi Gas

BLOOMBERG VIA GETTY IMAGES

THE ABU DHABI MARINE OPERATING Company (ADMA-OPCO) has a number of significant projects under way in Abu Dhabi, as well as enhanced oil recovery (EOR) at its existing operations. These include the Satah Al Razboot (SARB) Full Field Development project, which is expected to raise production to 100,000 barrels per day (bpd) by 2017. The company is also moving forward with the Umm Al Lulu and Al Nasr projects, which are expected to add 170,000bpd by 2018. In 2013, Abu Dhabi awarded four major offshore oil contracts worth almost $9 billion for work on the SARB, Umm Al Lulu and Upper Zakum concessions, with more awards expected on the Nasr field soon.

Onshore, the Qusahwira field was brought on-stream by the Abu Dhabi Company for Onshore Oil Operations (ADCO) in December 2013. The company is also working on the Mender field, which is expected to start producing in 2017. Both will help to boost production in ADCO’s south-east region, alongside the established Sahil, Asab and Shah (SAS) fields.

Further downstream, the United Arab Emirates is expanding its refining sector, with the aim of

UNITED ARAB EMIRATES – GROWTH OF A NATION 129

OIL AND GAS

Liquefaction Company (ADGAS) and Abu Dhabi National Oil Company (ADNOC), in collaboration with Shell and Total. The project involves developing the new Habshan 5 facility that will process one bcfd of non-associated gas from Khuff reservoirs beneath the Umm Shaif and Abu Al Bukhoosh oilfields, along with onshore gas and sour gas from nearby fields, totalling another bcfd. The Habshan 5 facility was completed in 2013, and processing capacity is eventually expected to rise to seven bcfd, along with almost 125,000bpd of natural gas liquids. In 2013, the IGD project won the ADIPEC award for best oil and gas project.

The OAG project began in 2010 as part of the larger IGD project. Two new gas processing plants on Das Island – with a combined capacity of 200 million cubic feet per day (mmcfd) of associated gas – and a 30in subsea pipeline will provide additional volumes to the Habshan facilities for processing, and eventual domestic consumption.

Growing domestic demand The technical difficulties of producing the country’s sulphur-rich (sour) gas once posed a major obstacle to the development of the UAE’s reserves, but advances in technology and the growing domestic demand for natural gas make the country’s vast reserves a viable alternative to more Qatari imports. ADNOC is pursuing a large-scale sour-gas development at the Shah field, which should come on-stream early in 2015, a slight delay from its original late-2014 start date. The Shah gas field is one of the largest in the Middle East region, and is being developed with Occidental Petroleum Company through the Al Hosn gas project under a 30-year joint-venture agreement. One of the disadvantages of developing such sour-gas fields is that only a proportion of the gas can be processed into marketable gas. When it does come online, an estimated one bcfd will be refined, producing 0.54bcfd of sweetened gas, to be used primarily in the production of electricity. In addition, the project is expected to produce more than 50,000bpd of natural gas liquids and condensate.

The OGD’s Bab development is also sour gas, and is being carried out by ADNOC and Shell in a 30-year partnership – signed in April 2013 – which should provide another 0.5bcfd by 2020. The projects to develop the sour Shah and Bab fields initially went to tender together, but, after a poor response from potential partners, the two fields were offered separately. ADNOC is delaying development of the Bab field until 2015, so that lessons from experiences at the Shah project can be applied.

While the Shah gas field is one of the most challenging sour-gas projects in the world, new technology is continuing to evolve quickly to meet the challenges presented by the UAE’s complex sour-gas fields. Anticipated advances include specialist materials plus automated vehicle access that enables safe transit in hazardous environments where there are concerns with ignition hazards and toxic gas.

Gulf Petrochem is developing a new oil products storage terminal at Fujairah

Besides the Shah and Bab sour-gas developments, ADNOC is also working with Occidental on new developments at the Jarn Yaphour and Ramhan fields to produce 100mmcfd. Awarded in 2008, that concession was the first in Abu Dhabi in almost 50 years. More recently, newcomers OMV and Wintershall have teamed up to appraise the Shuweihat field in Abu Dhabi’s western region.

Major projects in the mid- and downstream To help meet surging gas demand, Emirates LNG, a joint venture between IPIC and Mubadala Petroleum, has put forward plans for the Middle East’s first land-based liquefied natural gas (LNG) regasification facility at Fujairah, which were approved in 2013. The state-owned terminal will have an average throughput capacity of 1.2bcfd – or nine million tonnes – of LNG a year, and will be able to accommodate the largest LNG carriers, enabling it to purchase at the most competitive rates. The terminal is close to key power and desalination plants.

Other major projects in the mid- and downstream include Sharjah-based Gulf Petrochem’s new oil products storage terminal at Fujairah, which was commissioned in early 2013, with a capacity of 412,000 cubic metres. In May 2012, Vopak Horizon Fujairah – a joint venture between the Netherlands’ Royal Vopak, Dubai’s ENOC, the Government of Fujairah and Kuwait’s Independent Petroleum Group –

UNITED ARAB EMIRATES – GROWTH OF A NATION 130

OIL AND GAS

Kurdistan region, where production is expected to start at 30,000bpd. TAQA initially bought a 53.2 per cent interest in the block from Aspect Holdings, but sold part of that to the Iraqi Ministry of Natural Resources (MNR), leaving it with a 39.9 per cent share, along with the operatorship.

TAQA has established strong relationships with the MNR and the Kurdistan Regional Government (KRG). Iraqi development and operations are run out of Erbil, while sub-surface and technical expertise is based in Abu Dhabi.

“We see it as a huge and exciting opportunity,” Leo Koot, head of operations at TAQA, told ADIPEC – the region’s leading oil and gas conference, held annually in Abu Dhabi – in 2014. “We are going to be supplying the global market with hydrocarbons for decades to come from this particular reservoir. What is important for us is that our crude is exposed to the global oil market, so we get access to global oil prices, rather than a local one.”

TAQA’s sister company, Mubadala Petroleum, has a new focus area in East Africa, where plans include development of a natural gas offshore hub, with an eye on its mandate to provide additional gas supplies to the UAE. Mubadala Petroleum is in partnership with Ophir in an exploration block offshore Tanzania, with a new exploration well expected before the end of this year.

Mubadala’s traditional heartland has been SouthEast Asia, and the latest developments there include the approval of a joint oilfield development with Kris Energy off the coast of Thailand, with start-up now expected in early 2015. Mubadala Petroleum’s CEO, Maurizio La Noce, told ADIPEC that one of the company’s main advantages was that it could “draw on the strong relations and goodwill that our owner [the UAE] has developed with a range of like-minded countries. We also work in a variety of strong commercial partnerships in the Middle East and elsewhere.”

Mubadala is launching the Nong Yao project in the Gulf of Thailand, which draws on its experience in successfully operating nearby Jasmine, where production

AFP/GETTY IMAGES

expanded its Fujairah oil storage facility by 600,000 cubic metres. And a new $142 million oil storage terminal is being built at Jebel Ali by Horizon Terminals, the holding company of ENOC. The project includes a 60km pipeline link to supply jet fuel to Dubai’s new Al Maktoum International Airport, which will be fed by ENOC’s existing 120,000bpd Jebel Ali condensate refinery.

In refining and petrochemicals, South Korea’s SK Engineering and Construction plus Samsung Engineering are the main contractors in a $10 billion, 417,000bpd expansion at the Ruwais refinery. IPIC and ADNOC’s oil refining company, Takreer, has been working for several years on a project that will raise Abu Dhabi’s refining capacity to 885,000bpd from 485,000. Borouge, a joint venture between ADNOC and Austrian oil company OMV, and Tacaamol, a joint venture between state-owned Abu Dhabi National Chemicals Company (ChemaWEyaat) and IPIC, are bringing in private expertise and capital to expand existing and develop new petrochemicals facilities at Ruwais.

Emirates LNG has plans for the Middle East’s first land-based LNG regasification facility has surpassed 50 million barrels – more than five times what was initially expected. In Indonesia, Mubadala began production in October 2013 from the Ruby field, which is supplying gas to a fertilizer production plant in East Kalimantan, operated as part of the Indonesian Government’s National food security programme. This provides “an important base from which we can seek out other opportunities in Indonesia”, according to La Noce.

The Dubai Government’s ENOC also invests overseas, largely via its 52 per cent interest in Dragon Oil, which produces oil and gas in Turkmenistan.

Overseas acquisitions Several Abu Dhabi state-owned firms are active overseas.

The Abu Dhabi National Energy Company (TAQA) has acquired a series of relatively mature fields in the United Kingdom’s North Sea, and, more recently, it has established itself in Iraq with a stake in the Atrush Block in the

UNITED ARAB EMIRATES – GROWTH OF A NATION 131

ADVERTISEMENT

New horizons: artificial islands in the UAE and beyond Yasser Nasr Zaghloul, Chief Executive Officer of National Marine Dredging Company discusses the company’s pioneering project work and the next stage in its evolution Yasser Nasr Zaghloul CEO National Marine Dredging Company From its origins as a division of Abu Dhabi National Oil Company (ADNOC), National Marine Dredging Company (NMDC) has developed into an autonomous business, with its own board of directors and many achievements over the past 40 years.

The company conducts its operations from impressive premises in the Mussafah area of Abu Dhabi, where it employs a workforce of close to 1,500 staff, ranging from technical engineering personnel to administrators and industry specialists.

Yasser Nasr Zaghloul, CEO of NMDC, says the company’s growth plans now centre on tapping global markets. “Having completed various projects within the UAE and its surrounding area, NMDC is poised to take the next step towards becoming an internationally operating and recognised company.”

NMDC has a comprehensive portfolio of projects underpinning its growth targets. Over the past four decades, the company has been involved in a wide range of dredging, reclamation, marine and logistics work in the UAE. According to Zaghloul, one of the largest and “most presitigious” projects that NMDC has been associated with in recent years is the Zakum Offshore Development Project. “NMDC was awarded the project of building four

industrial islands in Zakum Offshore field, which is a part of ZADCO’s strategic plan for developing the petroleum operations of Upper Zakum from 550,000 to 750,000 barrels of oil per day by 2015.

“The concept of the offshore artificial island was a first for the region and can replace the requirement for multiple Wellhead Tower Platforms,” says Zaghloul.

“Artificial islands provided a more flexible and robust development base for the redevelopment of the Upper Zakum field, which will significantly reduce life-cycle development costs and enable long-term maximum recovery levels to be achieved.

The ‘green fields’ development on islands accelerates oil-development rate, is safer and more capital efficient.”

The work included dredging and land reclamation to create the offshore islands, breakwaters and revetments for the protection of the islands, and harbours and quay walls for the future logistics services to the individual islands. Zaghloul explains that one of the project’s greatest challenges was facilitating this construction in the midst of the live operating field without causing or having the potential for disruption. “This was achieved by careful planning and consultation with the operator and running our marine fleet and operations with high levels of safety redundancy. The completion of the works without incident is a testament to the efforts of our teams and adherence to strict safety and environmental procedures.”

Zaghloul says that the successful completion of this type of project demonstrates NMDC’s capabilities in multi-discipline engineering procurement

and construction marine projects. “The investment made in people and equipment during the project makes a good platform for participation in similar types of project.

The company has now developed from a dredging contractor – which remains our core business – into a multi-disciplined marine contractor.”

NMDC has long held a commitment to developing its capabilities, and the company’s recent sustained growth has been attributed to projects such as Zakum Islands. “Projects such as this have propelled NMDC into the regional and international markets,” says Zaghloul.

The company now has branch offices in regional Gulf Countries, as well as a regional office in India, and its long-term goal is to establish a worldwide presence.

“Recent project awards in Bahrain and Qatar are cementing our presence in the region and show our commitment and desire to establish this national company from the UAE in the global markets,” concludes Zaghloul.

P.O. Box 3649 Abu Dhabi, UAE T: +971 251 30 000 F: +971 25516500 E: info@nmdc.ae www.nmdc.com

OIL AND GAS

Embracing the private sector State-controlled oil and gas companies are increasingly collaborating with private firms to enhance expertise and extend global reach

THE UNITED ARAB EMIRATES MAINTAINS A free-market economy with minimal restrictions on private-sector activities, international trade or capital movements, providing an attractive environment for private investors. The Dubai Mercantile Exchange (DME), launched in 2007, was the first commodities exchange to offer a futures contract for a benchmark Middle Eastern crude and fuel oil, making the emirate a centre for trading crude and refined products, complemented by

limited trading of physical crude and an active market in physical products in the port of Fujairah, which handles about one million tonnes per month of marine transportation fuel and other oil products. The UAE has free trade zones where companies can be 100 per cent foreign owned, as opposed to in the rest of the UAE, where at least 51 per cent of a company must belong to an Emirati.

As well as being a trading centre, the UAE is the regional centre for refining and marketing businesses. With one of

UNITED ARAB EMIRATES – GROWTH OF A NATION 134

MATILDE GATTONI/CORBIS

OIL AND GAS

Dolphin Energy, with private investors Total and Occidental Petroleum, recently completed a project to pipe gas from Taweelah, pictured, on Abu Dhabi’s Gulf coast to Fujairah

UNITED ARAB EMIRATES – GROWTH OF A NATION 135

the most liberal economies in the region and such a large energy sector, the UAE has been a natural location for oil and gas companies, including the regional headquarters for supermajors BP, Total and Royal Dutch Shell – all three of which have been operating in the UAE for decades and are deeply committed. It is also an important centre for many companies, providing services to the region’s oil and gas sector. Furthermore, the UAE is one of the few Middle Eastern countries where oil companies can book oil and gas reserves, which provides an attractive incentive to invest in the country’s prolific upstream sector.

The UAE makes the most of the expertise and innovation of private companies to keep pace with the growing technological complexity of enhanced oil recovery and other techniques involved in accessing the hydrocarbon fuel from its increasingly mature fields.

Similarly, it utilises their skills and expertise to help advance the latest technology available to safely develop its extensive sour gas reserves. A single government entity cannot hope to master all the specialised operations and techniques needed in the modern upstream sector, and neither can it expect to have the same low costs as specialists in particular fields such as hydraulic fracturing or extended-reach drilling.

Expertise from across the globe The same applies to the mid and downstream sectors, where many of the private upstream concession holders also have equity. Among the biggest, BP and Total have stakes in Abu Dhabi Gas Industries, which produces natural gas liquids (NGLs) and condensates from the associated gas produced by the Abu Dhabi Company for Onshore Oil Operations (ADCO) and the Abu Dhabi Marine Operating Company (ADMA-OPCO). They also have stakes in the Abu Dhabi Gas Liquefaction Company (ADGAS), which processes the associated gas produced by ADMA-OPCO into liquefied natural gas (LNG), along with NGL and condensates. Combined with upstream stakes and shares in the National Gas Shipping Company (NGSCO) – which owns eight LNG tankers and exports the LNG produced by ADGAS – the majors can help contribute expertise from across the world to the UAE’s entire gas supply chain.

Further downstream, much of the focus in the development of gas-based industries in Abu Dhabi is on the development and expansion of power and water desalination plants, with the private sector playing a major role. For example, Dolphin Energy – with private investors Total and Occidental Petroleum each holding 24.5 per cent – imports two billion cubic feet per day (BCFD) from Qatar, or 30 per cent of the UAE’s energy requirements, and recently completed a project to pipe gas from Taweelah on Abu Dhabi’s Gulf coast to Fujairah, where it fuels two large power plants operated by Dolphin’s largest customer, the Abu Dhabi Water and Electricity Company.

MIDDLE EAST/ALAMY

OIL AND GAS

Tugboats at work with an oil tanker in Fujairah. The port handles about a million tonnes of oil products every month Total has been operating in the UAE for decades

MS BRETHERTON/ALAMY

On a smaller scale, Dana Gas and Emarat, a Dubai marketer of petroleum products, have jointly developed a common-user gas pipeline to serve Sharjah customers.

Local private operator Crescent Petroleum successfully implemented the first two gas-pipeline deals to cross Emirati borders. Crescent and Dana Gas, a Sharjah affiliate, are now developing the Zorah gas field, located in territorial waters shared by Sharjah and Ajman. Production of 50-60 thousand cubic feet per day (mcfd) is expected to start in 2014. Crescent is also involved in a tie-up with Russian state-controlled Rosneft to explore for gas under a new onshore Sharjah concession, where the two companies drilled their second well in 2013.

UNITED ARAB EMIRATES – GROWTH OF A NATION 136

OIL AND GAS

current strong macroeconomic position. In May 2013, it acquired Mondoil Enterprises, which produces oil and gas in the Cotê d’Ivoire. Also in Africa, which is seen as an area with high growth potential for UAE companies, Al Thani Corporation, a private-sector Dubai company, is exploring for oil and gas in several countries including Sudan, Egypt and Libya.

Driven by a key strategic partnership

JUMANA EL HELOUEH/CORBIS

Crescent Petroleum and Dana Gas are busy overseas as well, in the Kurdistan region of Iraq, with Austria’s OMV and Hungary’s MOL as junior partners, having invested over $1 billion in major gas projects under contracts signed with the Kurdistan Regional Government for the Khor Mor and Chemchemal fields. The 80,000 barrels of oil equivalent (boe) currently produced by the partners provide fuel for reliable and affordable electricity. The two private UAE companies recently led an official UAE trade delegation to the region, helping strengthen ties between the two countries.

RAK Petroleum, a private-sector Ras Al Khaimah company with international operations, holds stakes in oil and gas concessions in Sharjah and its home emirate. Its 42 per cent-owned affiliate DNO International produces about 35mcfd of gas from two fields in Oman’s territorial waters off the Musandam peninsula, which supplies Ras Al Khaimah with gas. Having been allowed to develop in its domestic sector, RAK Petroleum has expanded abroad, and is now involved in oil and gas exploration and production in Iraqi Kurdistan, Oman, Yemen and Somaliland, helping generate overseas income for the UAE – contributing, with others, to the nation’s

Dubai is the regional hub for BP’s refining and marketing businesses

As well as established supermajors and dynamic domestic private companies, the UAE is always eager to bring in fresh overseas private talent. One such new arrival is Germany’s Wintershall, which is hoping the Middle East will become its fifth core region, with Abu Dhabi at the centre. In the UAE, Wintershall is collaborating as operator with ADNOC and fellow European investor, OMV, in the Shuwaihat sour gas and condensate project, and is preparing the first appraisal this year. If the assessment is successful, then the firms will form an ADNOC-majority joint venture to develop the field.

Wintershall’s push on into the Middle East is being driven by a key strategic partnership with Abu Dhabi’s Mubadala Petroleum, announced in January 2014, which is also aimed at potential projects across North Africa.

“Wintershall hopes to develop technical competence together across the entire oil and gas value chain. We will also concentrate on new oil reserves,” Dr Rainer Seele, Wintershall’s chairman, told ADIPEC 2014.

Mubadala is a very good strategic partner for Wintershall and other private companies because of the cultural fit and financial strength that it can provide from Abu Dhabi, extending across the Middle East, Central Asian and North African regions. Other private partnerships with Mubadala include a joint venture with ConocoPhillips to explore for oil and gas in the Caspian Sea off the coast of Kazakhstan. Several years ago, Mubadala and Occidental Petroleum reached an agreement with the National Oil and Gas Authority of Bahrain to raise output from the Kingdom of Bahrain’s only onshore oilfield. Mubadala has also drawn in private-sector involvement to ensure the supply of gas to the UAE through its Dolphin Energy joint venture. “We believe we can offer strong partnerships, both with governments and commercial partners, alongside technical and operational capability and a record of project delivery,” Mubadala’s chief executive, Maurizio La Noce, told ADIPEC 2013.

Opportunities for private companies in oil and gas have been extended downstream with the opening up of the country’s utilities sector. This private investment, helped by higher infrastructure spending and supported by structural reforms, is contributing strongly to the growth and diversification of the UAE economy.

The 80,000 barrels of oil equivalent currently produced provides fuel for reliable and affordable electricity

UNITED ARAB EMIRATES – GROWTH OF A NATION 137

OIL AND GAS

Renewable energy to power economic diversification The UAE is investing billions in alternative sources of power as it seeks to reduce its reliance on the oil and gas industry

THE UNITED ARAB EMIRATES HAS long prioritised the diversification of its economy away from oil and gas, with Dubai already well established as one of the world’s key financial and trading centres. But within the energy sector itself there is plenty of room for diversification, both into alternative energy sources and by moving downstream into energy-intensive industries where feedstock costs are critical.

Building on its oil and gas base, the UAE is expanding its petrochemicals, aluminium and steel industries, which all require large amounts of energy and, in the case of petrochemicals, oil or gas feedstock as well. For example, Fertil, the fertilizer arm of Abu Dhabi National Oil Company (ADNOC), is developing a new $1.2 billion nitrogen fertilizer plant adjacent to the expanded Ruwais refinery, along with the developments by Borouge and Tacaamol. His Excellency Sultan Saeed Al Mansouri, UAE minister of economy, said the UAE industrial sector contributed

16 per cent to GDP in 2012, rising to 19 per cent last year, and that there was potential to grow it further.

However, this growth is increasing demand for gas, exerting greater pressure to replace it in other areas, especially oilfield reinjection and power generation, where gas-fired plants dominate the generating mix.

However, power demand is also rising quickly, and rather than replacing gas use, another 20 gigawatts (GW) of capacity is expected to be needed by 2020 to meet anticipated peak power demand of 40GW. The UAE already has one of the world’s largest per capita carbon footprints, due in part to the high demand for electricity from desalination and air conditioning. As is the case in other oil-rich Gulf Cooperation Council (GCC) nations, electricity production is subsidised and supplied to end users at less than the cost of generation, which encourages heavy use.

As a result, the country is seeking to improve efficiency and reduce reliance on hydrocarbons for power generation, to ensure more gas is available

UNITED ARAB EMIRATES – GROWTH OF A NATION 138

XINHUA/CORBIS

OIL AND GAS

Abu Dhabi’s 100MW solar plant is owned by a consortium that includes Total and Abengoa

UNITED ARAB EMIRATES – GROWTH OF A NATION 139

to expand the economy or replace imports. The UAE first publicly declared its interest in pursuing nuclear energy in 2010. The Emirates Nuclear Energy Corporation (ENEC) was set up to develop the sector both domestically and internationally, along with an independent regulator. The UAE has accepted a $20 billion bid from a South Korean consortium to build four commercial nuclear power reactors, with a total capacity of 5.6GW, by 2020 at Barakah in Abu Dhabi. Construction of the first unit started in July 2012, and the second in May 2013.

The UAE is also expanding its renewables sector, including solar power and waste-to-energy projects, along with more ambitious proposals for hydrogen and geothermal projects, targeting a total of seven per cent of its electricity from renewable sources by 2020. Altogether, Abu Dhabi’s low-carbon sources could account for 30 per cent of its electricity-generation capacity by 2020.

As part of Energy Vision 2030, Abu Dhabi has proposed an average price for the whole of its energy portfolio to ensure renewable development is competitive with fossil fuels.

Abu Dhabi’s renewable energy company Masdar is building the world’s first carbon-neutral and zero-waste city. Masdar City, which will rely on energy sources such as solar and wind, is scheduled for completion in 2016, with a projected cost of $22 billion. It is claimed that, when complete, it will use 70 per cent less electricity and 60 per cent less water than a conventional city.

The UAE intends that Masdar City will be a global clean technology hub. The federation is already home to the International Renewable Energy Agency (IRENA) and hosts the annual World Future Energy Summit.

World’s largest offshore wind farm Abu Dhabi’s first utility-scale solar plant, the 100 megawatt (MW) Shams 1 concentrated solar power plant, was officially launched last year. Developed on a ‘build, own, operate’ basis, the plant is owned by a consortium comprising Masdar with a 60 per cent holding, and Total and Abengoa, each of which have a 20 per cent stake.

The consortium has plans to expand to 2GW. A solar plant is also planned for Dubai with capacity up to 100MW. The move into solar should help develop a local industry.

MBM Holdings recently built a $400 million domestic solar-grade polysilicon plant, the first of its kind in the UAE and the largest in the region.

Masdar is also awaiting approval from the Abu Dhabi Executive Council to go ahead with a 100MW solar photovoltaic plant in Abu Dhabi, and has also proposed a 30MW wind farm on Sir Bani Yas Island. In addition to its local projects, Masdar has stakes in a number of renewable developments around the world, including the world’s largest offshore wind farm, the 630MW London Array.

The UAE is currently the biggest renewables market in the GCC, with $1 billion worth of projects under

ALI HAIDER/CORBIS

OIL AND GAS

Wind Tower in Masdar City, Abu Dhabi. At a projected cost of $22 billion, renewable energy firm Masdar is developing the first carbonneutral city in the world

construction or operational. In January 2014, thousands of environmentalists and green technology companies attended Abu Dhabi’s World Future Energy Summit to discuss ideas and sell innovations, underlining the country’s ambition to become a regional hub for renewable energy as well as hydrocarbons. Looking ahead, the total value of GCC renewable projects and plans due for award between now and 2025 is $162 billion, with the biggest long-term market being in Saudi Arabia.

Abu Dhabi is also fast developing into a financial centre for renewable energy investment in the developing world outside the GCC. IRENA and the Abu Dhabi Fund for Development (ADFD) have already issued $350 million in loans for renewable energy projects in developing nations, bringing sustainable power to rural communities across a wide range of countries, including Ecuador, Sierra Leone, the Maldives, Mauritania, Samoa and Mali. “Financing is one of the key issues renewable energy is facing, particularly in the developing world,” said IRENA’s director-general Adnan Z Amin. The current financing cycle is the first of seven.

In addition to the pressure to curb the expansion of gas use, there is a growing commitment among senior UAE officials to play a part in mitigating climate change by taking

UNITED ARAB EMIRATES – GROWTH OF A NATION 140

OIL AND GAS

A total of 1GW of gas-fired power plants are expected to have their emissions sequestrated by 2020. The resulting generating capacity will help the emirate achieve its goal of generating 30 per cent of its power from low-carbon sources, and also demonstrates the UAE’s global and regional leadership in the development of CCUS, and its support for climate change mitigation mechanisms.

Several emirates have also launched programmes to bolster energy efficiency and encourage energy conservation, reflecting a growing public awareness of the need to reduce carbon emissions. These include Abu Dhabi’s Estidama initiative, which aims to make the emirate the sustainability capital of the Middle East, with the implementation of a programme for sustainable buildings and communities. Similarly, Dubai’s muchanticipated green building code was approved by the government in 2010 and will be rolled out in phases.

Hydrogen power and aviation biofuel

KARIM SAHIB/GETTY IMAGES

action to curb CO2 emissions. ADNOC is already well on the way to eliminating gas flaring, conserving gas production and cutting emissions at production facilities and oil refineries through better management. Abu Dhabi’s main economic development and diversification plan includes a strategic commitment to pursue development that is as sustainable as possible.

To this end, ADNOC and Masdar have embarked on the Emirates Steel Industry (ESI) carbon capture, usage and storage (CCUS) project, which will capture emissions from a major steel plant in Abu Dhabi, before piping the gas to oilfields for use in enhanced oil recovery. This helps improve the economics of carbon capture, enabling the establishment of companies and expertise that in the longer term could be exported overseas. Eventually, the CO2 would be permanently stored underground in the depleted reservoirs.

The project is part of the 500km Abu Dhabi carbon capture and storage network being promoted

by Masdar, designed to collect six million tonnes per year of emissions from power plants, aluminium smelters and other industrial sites, as well as the steel plant, to oilfields for reinjection. Other parts of the project include a joint venture with Taweelah Asia Power Company and Emirates Aluminium to capture, use and store two million tonnes of carbon emissions from the aluminium smelter’s power plants. This project is to begin a phased approach to development during 2015-17, with an anticipated operational date of 2018. The UAE is able to make progress in carbon capture where others have been frustrated by a lack of financing or public resistance to storing emissions underground.

Abu Dhabi hosted the World Future Energy Summit in January 2014

In the longer term, even more ambitious renewable plans are on the table for geothermal and hydrogen generation. In 2010, the Icelandic company Reykjavik Geothermal carried out initial research and drilling for a major geothermal plant, although this project now appears to be on hold. The Hydrogen Power Abu Dhabi (HPAD) project is a $2-3 billion joint venture between Masdar and BP, to build the world’s first commercialscale hydrogen-fuelled power plant of 400MW, utilising natural gas and waste carbon dioxide. This has also been put on hold until at least 2018, with Masdar choosing to focus on the ESI, Emirates Aluminium and power plant carbon capture projects.

The UAE is also branching into alternative fuels for transport. For example, in January 2014, aircraft maker Boeing, Etihad Airways, Total and others said they would work together on a programme to develop an aviation biofuel industry.

The UAE already has a biofuel production plant under construction, with Dubai-based Petrixo Oil & Gas investing about $800 million in a one-million-tonne-per-year biofuel refinery in Fujairah. It will produce products including biodiesel, jet, naphtha and LPG. Petrixo has brought together a consortium of major international companies and financial institutions to set up the project, which is in line with the directives and sustainability goals of the leadership of the UAE. CCUS, renewables and other sustainable initiatives will provide a far more diversified and cleaner generation base, and should in time lessen the pressure on the country’s gas supplies, although further gas development and LNG imports are still needed in the short term if population growth and industrial expansion continue as forecast.

Abu Dhabi is fast developing into a financial centre for renewable energy investment

UNITED ARAB EMIRATES – GROWTH OF A NATION 141

Leader in Partnership Publishing Global media services agency Newsdesk Media works with a wide range of prestigious public- and private-sector organisations to provide marketing solutions in the fields of international trade and investment, financial markets, transport, telecoms, environment, energy, security and defence.

In partnership with GT Media ME, we are delighted to have produced this publication, United Arab Emirates: Growth of a Nation, the first in the series of official publications on behalf of the Government of the United Arab Emirates.

Contact us to find out how you can support future publications and promote your organisation to an influential audience through subsequent editions in May and November 2015.

For further information, call Laurie Pilate: +44 (0) 20 7650 1600

Newsdesk Media, 184-192 Drummond Street, London NW1 3HP

www.newsdeskmedia.com @newsdeskmedia

www.linkedin.com/company/newsdesk-media

www.ainalmusafer.com

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Foundations for the future: Dubai in the spotlight

STRINGER/CORBIS

The World Expo event will see billions of dollars invested in property and infrastructure development, and will put Dubai firmly on the road to realising its ambitious tourism targets

IN A LANDMARK VICTORY, DUBAI SAW OFF rival bids from Yekaterinburg in Russia, Izmir in Turkey and Brazil’s São Paulo in November 2013 to win the right to host Expo 2020. The triumph marks a first for World Expo, which, to date, has not been hosted by a country from the Middle East, North Africa and South Asia (MENASA) region. Scooping the prize was celebrated in Dubai by a fireworks spectacular, a national holiday and the decision to name a proposed new tower, set to be the world’s tallest commercial building, the Burj 2020.

Countries and cities compete vigorously to host World Expos because they represent an excellent national marketing opportunity. At the basic level, the Expos can be expected to lure tourists over the six months they run – in Dubai’s case, from 20 October 2020 to 10 April 2021.

But the emirate is hoping to do more than merely effect a temporary spike in its already healthy tourism statistics.

Dubai celebrates its Expo 2020 win with fireworks.

The Expo will provide a boost to the emirate’s construction sector

These events can also help to cement a city’s brand, redefine its global value proposition and propel it down the desired path of economic development.

World’s first purpose-built ‘aerotropolis’ Nothing, however, is guaranteed. According to data from the International Exhibitions Bureau (BIE), the governing body of the World Expo, Shanghai’s 2010 Expo drew 73 million extra visitors, and 246 participating governments and international organisations. It was clearly successful in showcasing China’s immense modernisation project. On the other hand, Hanover’s World’s Fair in 2000 was poorly attended and made a net loss of approximately $1.6 billion.

Dubai is taking great care to ensure that 2020 delivers the intended results. The emirate has drawn up an Exporelated investment programme worth $7 billion in order to capitalise on the opportunity. Officials estimate that

UNITED ARAB EMIRATES – GROWTH OF A NATION 143

the event will generate an extra $23 billion in business between now and closing time, a major boost to Dubai’s gross domestic product (GDP), which presently stands at $85 billion a year. The actual Expo 2020 site is to be built in the new Dubai World Central (DWC) economic free zone, which is billed as the world’s first purpose-built ‘aerotropolis’, as it functions as an integrated hub for transport, trade, manufacturing and logistics. Its centrepiece is the Al Maktoum International airport, Dubai’s second international airport, which opened for cargo in 2010, and for passenger flights in 2013.

If built as planned, at a cost of between $2 billion and $4 billion, it will be the largest ever centre for a World Expo.

The main site, covering 438 hectares, will be divided into residential, hospitality and logistics zones. The residential section will include an Olympic Games-style ‘village’ for the staff who will be working at around 250 national pavilions.

Building of the infrastructure will begin in 2015, once the BIE has approved the detailed master plan.

The village is set for completion in 2018, after which construction of the pavilions will begin. These will be located in a 150-hectare gated Expo site that will also be divided into three zones based on the themes of mobility, sustainability and opportunity. The UAE Pavilion will feature a Welcome and an Innovation Pavilion near the north entrance surrounding the central plaza, while three souks, each in one of the theme zones, will showcase the pavilions of smaller countries. The pavilions of larger countries will be on the circumference of the site. Each of the three zones will also have an entertainment venue and a specialised theme pavilion. Organisers are aiming to complete construction of the entire site early,

by October 2019, to allow a full year for commissioning.

Extra transit capacity It is expected, however, that supporting infrastructure in the transport, hospitality, retail and commercial sectors will represent the most substantial construction opportunities.

The effects of the Expo were being felt even before the November announcement, when Dubai’s Roads and Transport Authority (RTA) promised that, if Dubai won the bid, it would fast-track a proposed $1.36 billion extension of Dubai Metro’s Red Line from its current southern terminus at Jebel Ali to the Expo site at DWC. The Dubai Metro, which opened in 2009, currently runs for 75km, making it the longest driverless metro network in the world. The extension will add between nine and 14km to Red Line, depending on the route chosen. It is hoped to further ease traffic congestion in Dubai. Passenger numbers on the metro have increased by around 20 per cent since it opened, with 366,000 people a day using the system in 2013. With Expo 2020 predicted to bolster the visitor numbers by around 25 million, this extra transit capacity will be essential to the emirate.

ALI HAIDER/EPA/ALAMY

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Al Maktoum International airport is the centrepiece of the Dubai World Central economic free zone

The Shams 1 solar power plant. Expo 2020 is expected to benefit innovations in alternative energy

BEN JOB/REUTERS

The Expo is sure to provide a boost to commercial developments as well. Just days after Dubai was declared the winner, developer Emaar Properties announced the signing of a memorandum of understanding with DWC to develop a 13-million-square-metre golf-centred residential estate adjacent to the Expo 2020 site. The development, described as “a remarkable new work, live and play destination”, will include hotels, a shopping mall, leisure attractions and a business hub promoting youth entrepreneurship.

More Expo-related developments are also expected.

Residential developers will be very interested in land around the Expo site. Tasweek, an Abu Dhabi-based property investor, was first to move, announcing it had signed a joint venture with a landowner to develop 800 new town houses nearby in the weeks before Dubai had even won the Expo bid. Developers will bank on DWC, with its profile and fortunes boosted by the Expo, being a

UNITED ARAB EMIRATES – GROWTH OF A NATION 144

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

The Expo 2020 executive body predicts that the event will create 277,000 new jobs in total and will yield $24.2 billion in additional economic activities, providing a lift to neighbouring cities, particularly Abu Dhabi, as they absorb the extra demand for goods and services.

Lifted business confidence

CHRIS NORTH/ALAMY

new centre for Dubai – one that has the added advantage of being within closer striking distance of Abu Dhabi.

With a strong sustainability theme, the Expo is expected to benefit technological innovations in both conventional and alternative energy, as well as engineering, urban planning and logistics. The sustainability theme will be exemplified by the site generating half its energy needs from renewable sources, with the emphasis placed on solar energy. The aim is to cut water consumption by a quarter and a waste recycling strategy will be put into place during the construction phase. To encourage the use of public transport, in addition to the Red Line extension, the zero-emission ‘ExpoRider’ bus service will operate between the site and hotels throughout the UAE. At the various pick-up points, passengers will undergo ticket checks and security screening, thereby eliminating the need for further checking when they arrive at the Expo site.

Expo 2020 will also act as a catalyst for Dubai’s hospitality, leisure, retail and consumer sectors.

Organisers believe the event will attract an estimated 25 million attendees – 70 per cent of whom will be foreigners – over and above the 16 million non-Expo visitors expected to descend on Dubai in 2020. It will require significant investment in hospitality and retail infrastructure to meet the estimated demand for 70 million room nights and the forecast extra $10 billion in retail spending. Consultant PKF has calculated that in Dubai, where hotel occupancy rates are already high, as many as 60,000 additional rooms in more than 200 hotels would need to be provided by 2020, presenting a clear opportunity for hospitality developers and constructors.

The construction sector can expect to gain about 90,000 jobs as a result of the Expo, says Cynthia Corby, an audit partner specialising in construction at Deloitte Middle East.

A $1.36 billion extension of Dubai Metro is to be fast-tracked as a result of the emirate winning Expo 2020

A survey conducted by the Department of Economic Development concluded that Dubai’s Expo 2020 victory had lifted business confidence in the emirate in the first quarter of 2014 (1Q14). Optimism is running especially high among manufacturing and services firms, said the Business Confidence Index for Dubai. The index stood at 135.5 points in 1Q14, an increase of 22.4 points on the figure for the first three months of 2013. New projects expected as a result of Expo 2020 are driving positive perceptions, the department said.

Feeding into the bigger investment picture is the expected diversification that Expo 2020 will bring to the UAE economy, both in Abu Dhabi and Dubai, in sectors such as aviation, logistics, financial services, manufacturing, real estate and, in particular, leisure and hospitality. Dubai had 10 million tourists in 2012 and, as a tourism destination, it competes well with the likes of London, Paris, New York, Singapore and Bangkok. Furthermore, it has ambitions to double its visitor rates to 20 million annually by 2020.

To achieve that goal, Dubai must be able to receive and accommodate 20 million-plus tourists a year, and, to prevent the 2020 figures from becoming nothing more than an Expo-driven peak, the emirate is determined to ensure that the facilities and infrastructure do not become white elephants. Expo 2020 could cement Dubai’s status as one of the leading business hubs in the world. It stands to boost Dubai’s brand beyond tourism and could showcase the UAE’s diversified portfolio of economic sectors. The federation’s leaders will be looking to demonstrate how

Expo 2020 could cement Dubai’s status as one of the leading business hubs in the world major infrastructure and real estate projects can be leveraged after the Expo through sustained demand creation and legacy planning.

Expo 2020 stands every chance of adding significant extra thrust to the UAE’s already powerful development trajectory. The demand for skills and resources will of course increase and, against the backdrop of an infrastructure boom in Qatar and continued high construction activity in Saudi Arabia, Dubai will need a well-planned Expo development strategy to ward off logistical bottlenecks, talent shortages and undue construction price inflation.

UNITED ARAB EMIRATES – GROWTH OF A NATION 145

Are You Defining Tomorrow’s Environments?

Kier are proud to have played our small part in the tremendous development and growth of the UAE. Since 1978 we have been constructing facilities and helping define the current environments within the Nation. From planning, finance and design through to construction, maintenance and management Kier have the ability to deliver integrated solutions and define tomorrow’s environments for you.

To find how Kier can help you in Defining Tomorrow’s Environments visit: Kier Construction LLC

Office No. 403, 4th Floor Liwa Tower, Khaleej Al Arabi St. ADNEC Area P.O. Box 61967, Abu Dhabi, U.A.E. Tel: +971 (2) 559 7370 | Fax: +971 (2) 559 7470 | Email: adoffice@kier.ae

Kier Dubai LLC

Office No. 1413, Grosvenor Business Tower, TECOM, Sheikh Zayed Road P.O. Box 24461, Dubai, U.A.E. Tel: +971 (4) 362 9907 | Fax: +971 (4) 362 9323 | Email: dubaioffice@kier.ae

KEVPIX/ALAMY

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Building a global hub Dubai and Abu Dhabi are the focus of renewed investment in infrastructure and cultural development, as the United Arab Emirates takes advantage of its geographical location

WHEN THE SHOCKWAVES OF THE GLOBAL financial crisis were still reverberating through the United Arab Emirates, many felt that the extraordinary economic rise of the emirates – Dubai in particular – had been exposed as little more than a property bubble. In 2009, nearly 3,000 cars, many of them high-performance, were abandoned at Dubai airport as their owners cut their losses and bought one-way tickets home to escape unsupportable debts. House prices in Dubai plunged by more than 50 per cent during the crisis and, even in the oil-rich Abu Dhabi, industrial rents, seen as a reliable

A portion of Dubai Metro’s expansion. The Red Line is to be extended from the southern terminus at Jebel Ali, to the Expo 2020 site at Dubai World Central

indicator of a city’s economic well-being, dropped by as much as a third. To sceptics, it seemed that the dream of a Gulf state sustainably diversifying away from hydrocarbons had been a misguided adventure.

Three years on, the picture looks very different.

In the first quarter of 2014, Dubai real estate prices climbed by 33 per cent compared with the same period in 2013, according to Jones Lang LaSalle. Meanwhile, the International Monetary Fund expects the UAE to grow 4.4 per cent in 2014, a revision upwards from the 3.9 per cent predicted in October 2013.

UNITED ARAB EMIRATES – GROWTH OF A NATION 147

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Foreign direct investment (FDI) flows reached just over $8 billion in 2012, up by as much as 26.5 per cent on the year before, according to Dubai FDI, the foreign investment office. Clearly, the value the UAE represents to the world runs much deeper than oil and property.

The key to this revival is the UAE’s strategic location.

Lying between Asia, Europe and Africa, the country is well positioned to act as a unique transcontinental trade and logistics hub. It is a role that Dubai in particular has embraced and, combined with investments in cultural and tourism facilities over the past 15 years, it has set the tone for the UAE’s present and future construction challenges.

Rail, seaports and airports are all needed to link the UAE into the 21st-century Silk Road, while inside the country, roads and railways are needed to move goods and people around. In turn, homes, offices and leisure facilities are required to accommodate them.

All UAE cities are expected to experience construction growth. Fujairah, for instance, has embarked on a masterplanning exercise to upgrade and expand its international airport. Al Ain has sought tenders for the construction of a brand-new $1.17 billion hospital. Also in Al Ain, Mubadala Development, Abu Dhabi’s state-owned investment fund, has invited expressions of interest from contractors for stage one of the proposed Nibras infrastructure project at the Nibras Al Ain Aerospace Park. And in Sharjah, the new Sir Bu Nair Island tourism scheme, which will host a luxury five-star hotel and resort, cultural attractions, plus a harbour and airport, is set to be completed in 2017. But it is in the UAE’s most populous city states, Dubai and Abu Dhabi, that the most significant activity has been occurring, and these two will continue to be the main focus.

Dubai’s burgeoning success as a trade hub can be seen most clearly in the expansion of its airport capacity. From modest beginnings in 1959 as a single compacted-sand

FRANK DE LUYCK/GETTY IMAGES

Construction work on one of Dubai’s artificial canals. A 2.8km waterway is being built from Business Bay to Jumeirah Beach

Increased trade and tourism boost Dubai’s temporary and permanent populations runway, Dubai International Airport (DBX) has grown to become the seventh busiest airport in the world in 2013, and the second fastest-growing by passenger activity, handling more than 66 million passengers per year.

An investment forecast to reach $34 billion It will not stop there. Dubai Airports is moving forward with a $7.8 billion expansion programme for DBX, which will boost annual capacity to 90 million passengers by 2018. The plan involves the construction of additional terminal space and concourse areas constituting an extra 675,000 square metres of floor space – almost twice the footprint of London Heathrow’s Terminal 5.

If the rise of DBX is remarkable, more astonishing still is the fact that it will eventually be a junior sibling to Dubai’s other airport, Maktoum International, centrepiece of a purpose-built ‘aerotropolis’ located near Jebel Ali Port.

Known as Dubai World Central, the aerotropolis comprises a vast, custom-bonded, sea-to-air (and vice versa) trade and logistics hub. Maktoum International opened in 2010 to cargo flights, and to passenger flights in 2013. When all of its construction phases are complete – an investment forecast to reach $34 billion by completion in 2027 – it will have the capacity to handle 12 million tonnes of cargo per year and 160 million passengers, which would almost certainly make it the busiest airport in the world.

Of course, Dubai is not all about throughput. Increased trade and tourism boost both its temporary and permanent populations, which means that the city is in a more or less constant state of catch-up when it comes to transport infrastructure. At the start of 2014, Dubai’s Roads and Transport Authority (RTA) announced that more than $1.9 billion would be spent on road, marine and public transport projects in this year alone.

The municipality has made impressive strides, superimposing the Gulf region’s best mass-transit system onto a traditionally car-loving society. The Dubai Metro, which opened in 2009, currently covers 75km of track.

When Dubai won the bid to host the World Expo in 2020, the RTA said it would fast-track a $1.36 billion extension of the Metro’s Red Line from its current southern terminus at Jebel Ali to the Expo 2020 site at Dubai World Central.

It is extending the line at the other end, too, adding a total of 12 new stations. The RTA also plans to double the length of the Green Line and add 11 new stations to the current 20. Other efforts to lure people away from their

UNITED ARAB EMIRATES – GROWTH OF A NATION 148

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

ZAHA HADID ARCHITECTS

Donald Trump, whose earlier proposed Trump Tower scheme on the Palm Jumeirah was a high-profile victim of the financial crisis, expressed a desire to try again to develop a luxury hotel in the emirate.

Beginning of a return to pre-2009 activity

Artist’s impression of Zaha Hadid’s Performing Arts Centre, to be built in Abu Dhabi

Louvre Abu Dhabi is under construction on Saadiyat Island

cars include the new Dubai Tram system, which will run for 11km along Al Sufouh Street. The first phase is due for completion in November 2014.

The financial crisis froze a number of civic projects designed to ease the city’s circulation and boost investment.

However, many of these are now back on track, among them the Dubai canal scheme, which will see a 2.8km waterway built from the Business Bay area to Jumeirah Beach. The project, which includes the development of hotels, shopping centres and leisure facilities, has most recently been costed at $544 million and will involve the elevation of part of Dubai’s main traffic artery, the 12-lane Sheikh Zayed Road.

Previously renowned for the flamboyance of its leisure developments, Dubai became subdued after the crash.

But among the projects signalling a return to form is the new five-star, $1 billion Viceroy hotel under construction on the Palm Jumeirah. The Viceroy Dubai Palm Jumeirah is part-financed by China State Construction Engineering Corporation and by China’s largest bank, the Industrial and Commercial Bank of China (ICBC) – its first venture in the Gulf region, and surely an indication of the appeal of Dubai’s hotel sector to foreign investors. If further indication were needed, in May 2014, property magnate

Although often seen as a more conservative elder brother to Dubai, Abu Dhabi has enjoyed its share of construction recovery. In the first quarter of 2014, the Abu Dhabi Urban Planning Council approved 13 development projects totalling over four million square metres, marking the beginning of a return to pre-2009 activity levels. One of the biggest projects approved was Aldar Properties’ Al Raha Beach East master plan, consisting of 20km of reclaimed coastland, with canals and islands linked by boulevards. While most of these schemes are purely residential, some have other elements, such as the new Petroleum Institute project, which will feature a research centre as well as residential blocks.

The focus of activity, however, continues to be a cluster of highly ambitious cultural developments on Saadiyat Island, including designs by international architects.

April 2014 saw the completion of New York University’s Abu Dhabi campus, which has 21 buildings including lecture theatres, a library, sports halls, residences and laboratories.

Also under construction in the Saadiyat Island Cultural District is the Louvre Abu Dhabi, designed by Jean Nouvel, due to open in late 2015. It will be followed by Norman Foster’s Sheikh Zayed National Museum in 2016 and Frank Gehry’s local adaptation of the Guggenheim in 2017. Zaha Hadid’s Performing Arts Centre will follow. With these developments, Abu Dhabi aims to create a cultural entrepôt to rival Dubai’s status as a global trade and logistics hub.

Sign of UAE’s desire for holistic development Taking the country as a whole, it is difficult to choose which development might count as the most remarkable because so many compete in terms of scale and ambition.

But one scheme does stand out. In 2009, Etihad Rail was established to build the UAE’s first national freight and passenger railway network. Covering 1,200km in total, it will be built in phases to link the principal cities and industrial centres of the UAE. When complete, it will connect with the planned Gulf region rail network linking Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

The first phase, under test in 2014, is a 150km link from the sulphur-producing district of Habshan to the Western Region port of Ruwais, where the sulphur will be exported by sea. In March 2014, Etihad Rail signed a contract with Germany’s DB Schenker Rail for the operation and maintenance of the first stage of the network. Considering that, before 1973, there was not even a road between Dubai and Abu Dhabi, the rail network is the clearest sign yet of the UAE’s desire for holistic development.

UNITED ARAB EMIRATES – GROWTH OF A NATION 149

Creating Creatingvalue valuearound aroundthe theworld... world...

Everywhere, Everywhere,every everytime... time...

WeWe take take on on many many challenges, challenges, whether whether it be it be thethe deserts deserts of of thethe Middle Middle East East or or thethe snow-laden snow-laden mountains mountains of Russia. of Russia.

WeWe continue continue to deliver to deliver creative creative electromechanical electromechanical engineering engineering solutions. solutions.

Anel_UAE IlanSON.indd 2-3

.

Baku Baku Olympic Olympic Stadium Stadium Abu Abu Dhabi Dhabi International International Airport Airport Qatar Qatar Convention Convention Center Center New New Doha Doha International International Airport Airport Marmaray Marmaray Immersed Immersed Tube Tube Tunnel Tunnel Project Project Ford Ford Otosan Otosan CarCar Factory Factory Hilton Hilton Garden Garden InnInn Hotels Hotels Hamad Hamad Medical Medical City City

Dubai: Dubai: Bayswater Bayswater Tower, Tower, 10th Floor, 10thNo Floor, 6, Business No 6, Business Bay, Dubai, Bay, Dubai, UAE | Tel: UAE+971 | Tel:4+971 457 0481 4 457| 0481 Fax: +971 | Fax:4+971 457 0482 4 457 0482 Abu Dhabi: Abu Dhabi: Lulu Center Lulu Center Building, Building, 19th Floor, 19thAl Floor, Salam Al Street, Salam Street, Abu Dhabi, Abu Dhabi, UAE | Tel: UAE+971 | Tel:2+971 678 9000 2 678| 9000 Fax: +971 | Fax:2+971 678 8688 2 678 8688 Qatar: Qatar: Qatar Finance Qatar Finance House House Building, Building, C-RingC-Ring Road Near RoadGulf Near Cinema, Gulf Cinema, 2nd Floor, 2ndNo. Floor, 2, No. 2, PO BoxPO 21346, Box 21346, Doha, Qatar Doha,|Qatar Tel: +974 | Tel:4421 +9740201 4421 |0201 Fax: +974 | Fax:4436 +97436 4436 29 36 29 www.anel.com.tr www.anel.com.tr

4/30/14 8:48 PM

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Real estate revival As development picks up again across the country, the United Arab Emirates’ economic recovery is being mirrored by rising prices in the property market

THE UNITED ARAB EMIRATES HAS A volatile economy. World Bank figures show that between 2004 and 2012, annual gross domestic product (GDP) growth varied between a high of 9.8 per cent in 2006 and a low of -4.8 per cent in 2009. The average year-on-year change was 4.2 per cent, a huge figure in what is now the world’s 28th largest economy.

Prices in the property sector provide an index of the confidence that investors inside and outside the emirates place in its economy. This means that the susceptibility of

the UAE to spurts of growth and abrupt ‘corrections’ is reflected in changes in price and rental yield. The most vulnerable emirate to these movements is Dubai: its dependence on the real estate sector intensifies the normal expansion and contraction of investment in the business cycle, as well as external shocks such as the collapse of the housing market in the United States in 2008. Investing in this market is not for the faint-hearted.

A second factor to take into account is that the seven emirates that make up the UAE are very different from one

UNITED ARAB EMIRATES – GROWTH OF A NATION 152

SERGEY ORLOV/ALAMY

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

another. Abu Dhabi accommodates the seat of the UAE’s federal government, covers about half of its land mass, and owns 95 per cent of its oil resources (which make up nine per cent of the world’s proven reserves). This allows the emirate to act as a sheet anchor for its flamboyant northern neighbour and, when disaster did strike Dubai in 2008, Abu Dhabi stepped in with a $20 billion loan that saved it from defaulting on loan repayments.

Abu Dhabi has been successful in diversifying its economy away from hydrocarbons, which accounted for 55 per cent of the emirate’s GDP in 2013 and 53 per cent the previous year. Dubai’s growth was initially based on oil revenue, but this now provides less than two per cent of its GDP. Rather, it has staked its future on becoming the commercial, tourist and business services hub for the region. To support this ambition, Dubai has developed a talent for showmanship, illustrated by several eye-catching projects completed over the past 10 years. Well-known examples, such as the Palm Jumeirah and The World, were

An aerial view of apartments in Dubai city.

Residential property prices in the emirate have been forecast to rise by 23 per cent

built from dredged sand as a way of extending the emirate’s coastline and providing more beachfront properties.

The other five emirates are clustered in the northeast of the country, near its border with Oman. There is a pronounced gap in the standard of living between Abu Dhabi and Dubai on the one hand and the northern emirates. The latter recently received a $1.6 billion investment injection into water and power infrastructure projects, partly in response to the unrest that swept the Arab world in 2011. However, with the exception of Sharjah and Ras Al Khaimah, these emirates are not significant destinations for international investment.

Abu Dhabi Abu Dhabi’s economy grew by 4.8 per cent in 2013, and its state-supported enterprises have continued to commission a wide range of construction projects. Despite the increase in supply, this was still hugely outstripped by demand.

According to a report by the property agency Cluttons, the

UNITED ARAB EMIRATES – GROWTH OF A NATION 153

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

price of residential property in the emirate rose 39 per cent over the course of 2013, although that growth did fall from 14.4 per cent in the third quarter of the year to 7.7 per cent in the fourth. There was a further small drop in the first quarter of 2014, to 7.2 per cent.

One factor in these increases is the decision in January 2014 to allow buyers to own freehold properties. This has increased interest among Russian and Chinese buyers looking to take advantage of the rapidly inflating price of property. Another regulatory factor was the decision in the last quarter of 2013 to remove a cap on rent increases. This had the consequence of fuelling demand for freehold apartments as families looked to escape from the increasingly costly rental sector. Jones Lang LaSalle (JLL), a global real estate consultancy, said the removal of the cap would have a “major” impact on rents. It welcomed “the introduction of a new, well-considered, rental control mechanism to keep Abu Dhabi cost competitive”.

The degree of regulation that will ultimately be imposed on the real estate market is unclear: Saeed Eid Al Ghafli, the chairman of the Department of Municipal Affairs, said an integrated system of real estate laws and regulations was being prepared. It is expected that a new property index will be launched later this year, dividing Abu Dhabi city into 10 to 12 zones according to their rental levels.

However, the principal cause of the rapid increase in residential prices has been the lack of development during the global recession. Now, a series of large-scale schemes are coming on-stream. In the UAE as a whole, around $50 billion worth of construction projects are expected to be awarded, the highest total since 2008.

According to online business development and market analysis tool MEED Projects, work has resumed on $17 billion worth of stalled projects since the start of 2012.

KAMRAN JEBREILI/PA IMAGES

Dubai, which hosted the Cityscape Global property fair, is attracting keen interest from Chinese investors

In the UAE as a whole, about $50 billion worth of construction projects are expected to be awarded, the highest total since 2008 Abu Dhabi is relying on an increase in supply to moderate the rise in prices. In April 2014, officials announced that 32,000 housing units would be added to the city’s stock. This 13 per cent increase will lift the total for homes in the city to 280,000. Among the projects coming to market is District One at Mohammad bin Rashid (MBR) City, a freehold development of 1,500 villas spread across 1,030 acres. According to its developers, this will be one of the lowest-density housing developments in the world. However, Cluttons has noted that the most soughtafter properties are those consisting of traditional

residential neighbourhoods close to or on Abu Dhabi island and within easy reach of Sheikh Zayed Road. Cluttons said that it was too early to assess how the flood of new properties would affect price growth in the market.

Dubai Dubai’s Department of Economic Development reported in March that 97 per cent of businesses surveyed expected stable or improving sales conditions during 2014. One consequence of this wave of optimism is that much of the slack has already been taken out of the housing and office market. Agent CBRE reported in the first quarter of the year that class A office space for corporations requiring contiguous floors in the city’s central business district was limited. It added that “only small pockets of space [were] now available in Emaar Square and the Standard Chartered Tower”.

Craig Plumb, JLL’s head of research for the Middle East, said that residential prices were 15-20 per cent below the 2008 peak, but would probably pass that mark by year end. “Our view at the moment is that the price growth is unsustainable,” he explained. “We see price growth in Dubai growing at an average of 23 per cent. When you consider that the economy is growing by five per cent and population is growing at four per cent, then that is too fast.”

He added that JLL expected price growth to moderate to about 10-15 per cent over the course of 2014.

According to JLL, most of this growth is being driven by investment from outside the region. Kabir Mulchandani, the chief executive of investor SKAI Holdings, wrote in his blog that interest from Chinese investors has been a significant factor. He said: “In the past year, there has been a surge in demand from individual and commercial entities.

UNITED ARAB EMIRATES – GROWTH OF A NATION 154

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

IAIN MASTERTON/ALAMY

He added that JLL supported the rental cap, which has been retained by the government: “It’s working very well.

If there were no cap, rents would go up more quickly and it would be even more scary. I think the Government of Dubai realises that it has to remain an affordable city.”

Sharjah and Ras Al Khaimah

IAIN MASTERTON/ALAMY

Emaar Square: class A office space in Dubai’s central business district was reportedly scarce in the first quarter of 2014

Luxury villas in the Al Hamra development in Ras Al Khaimah.

The emirate is staking its future on the tourism industry

Chinese investors spent $353 million on land, residential units and office real estate in Dubai last year, according to data from the Dubai Land Department. For many of these investors, the city is an opportunity to diversify their investments; returns are more attractive than Hong Kong, Shanghai and Beijing. As such, I expect an increasing number of developers to look eastward for financing and sales.”

Plumb played down the impact that Dubai’s success in winning the Expo 2020 would have on the property market: “The market here is driven by sentiment and confidence, and the Expo win increased that, but it’s six years away, and even then it’ll be great for the overall economy and for the hotels and industrial warehousing market, but for offices and residential it won’t have such a big impact, and certainly not in 2014.”

One emirate that has benefited from the price rise in Abu Dhabi and Dubai has been Sharjah. Although it has a total population of around 800,000, it is attracting interest from buyers, partly because of its good transport links to Dubai, and partly because of the growth of its aviation sector, based around Sharjah International Airport, and a growing number of international schools.

Residential rental values in Sharjah leapt by almost 16 per cent during 2013 as tenant demand surged and construction work rates remained low. According to Cluttons’ first-quarter report, rents rose by 3.4 per cent in the final quarter of 2013, and by 4.5 per cent in the first three months of 2014, which equated to a 19 per cent year-on-year increase.

The greatest uplift in property prices occurred in Sharjah’s central business district of Al Qassimiya, which is about 30km from the centre of Dubai. Rents here rose 36 per cent during 2013. Overall, rents for apartments in Sharjah increased by nine per cent in the first quarter of 2014, after rising by almost 20 per cent over the course of 2013. As with Abu Dhabi, the strongest demand is for villas, particularly along the Sharjah Airport/ Maliha Road corridor. As well as the spillover effect from Dubai, growth in Sharjah is being bolstered by expanding levels of economic activity; Sharjah’s state budget for 2014/15 rose by seven per cent to $4.2 billion, and about half of that will be spent on development.

Ras Al Khaimah, which occupies the northern tip of the UAE, is also benefiting from its relative affordability compared with its southern neighbours. The emirate has a population of about 231,000, of which about two thirds are expatriates. It has staked its future on the tourism industry, based on its beaches, mountains and archaeological sites.

The government is investing $500 million in tourism development projects, which will bring the emirate’s total hotel and resort room inventory to 10,000 by 2016. This investment is complemented by global hotel chains and the establishment of a special investment zone. If this effort is successful, the emirate’s real estate sector could be a shrewd investment.

One indication of rising confidence was the decision in May 2014 to restart the $2.2 billion Shah Rukh Khan Boulevard, which was put on hold in 2008. According to the Emirates 24/7 website, the scheme is being managed by US developer TSA Group on Dana Island. It will be a tourist resort containing hotels, a shopping centre and commercial complexes spread across 6.3 million square metres.

UNITED ARAB EMIRATES – GROWTH OF A NATION 155

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

A postgraduate engineering student of the Masdar Institute, which was completed in the first phase of the Masdar City project

UNITED ARAB EMIRATES – GROWTH OF A NATION 156

CLINT MCLEAN/CORBIS

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Masdar: city of the future Hailed as the world’s most sustainable eco city, Masdar is breaking new ground with a combination of the latest technology and traditional design solutions

WHEN DESIGNED FROM SCRATCH, smart cities conjure up the alluring possibility of allowing technology free rein to solve the problems besetting modern urban areas. They enable us to use what we know about smart networks, renewable energy, the latest construction materials, best-practice urban design and master planning to create communities that use minimal resources to create maximal quality of life.

Smart cities, like high-speed rail networks and nuclear power stations, have become symbols of modernising economies: India and China, with their rapidly urbanising populations, see them as vital to their future economic wellbeing. Yet, it is not entirely clear what model should be used for their construction, or exactly how they will work. Some new cities have floundered at the planning stage, such as the eco city of Dongtan, outside Shanghai, which was to have

UNITED ARAB EMIRATES – GROWTH OF A NATION 157

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

powered the latest technology by burning rice husks.

Others, such as the Republic of Korea’s Songdo International Business District, have developed as isolated communities aimed at the international jet set.

However, one city has staked a claim to be a successful prototype of a smart-from-the-start design, and that is Masdar City in Abu Dhabi, designed by London-based Foster + Partners. It has been funded by seed capital put up by the Government of Abu Dhabi through its Mubadala Development Company, although it is expected that the final version will attract an investment of about $18 billion by 2025.

System of clean-energy vehicles The notion of a low-carbon city in an environment where the average temperature hovers around 40°C for five months of the year is remarkable enough, but perhaps the really surprising aspect of Masdar is how much of its success is due to its use of traditional design solutions, and how much can be achieved without connecting every brick, car and street light to the internet.

For example, the city’s temperature is always between 15 and 20°C cooler than that of the surrounding desert simply by the way it creates its own breeze and shade.

The entire site is raised a metre or so above the level of its surroundings, and a 45m-high wind catcher, taken from traditional Arab and Persian designs, deflects air from above and pushes it through the streets, which are themselves narrow and high enough to escape direct solar heat gain. The narrowness of the streets is possible because the city was not designed with the car in mind. Originally, it was intended to use a system of driverless pods, although this idea was subsequently dropped owing to the expense of creating the undercroft these would require. Instead, a system of electric and other kinds of clean-energy vehicles is being planned.

The city’s commitment to renewable energy has won backing from environmental groups such as Greenpeace.

Masdar gets its electricity from a 22-hectare field of 87,777

MATILDE GATTONI/GETTY

A model of Masdar City Beam Down, a joint solar power pilot initiative by the Masdar Institute of Science and Technology and the Tokyo Institute of Technology

Masdar’s commitment to renewable energy has won backing from groups such as Greenpeace KAMRAN JEBREILI/PA IMAGES

photovoltaic panels. Movement sensors control lighting and water to ensure they are only supplied if actually needed.

This should reduce electricity use by 51 per cent and water use by 55 per cent. The water that is used will be recycled, and then used to irrigate vegetables and other plants.

In a world first, Masdar is planning to power a seawater desalination plant using renewable energy, rather than coal or oil. Contracts were announced in May 2014 with four companies that are to begin work on test plants. Each

will be given 18 months to devise the best solution it can, in cooperation with the Masdar Institute of Science and Technology. The work is particularly important given that the Middle East region currently accounts for half the world’s desalination capacity, and considering the energy-intensive nature of the purification process.

As with many projects around the world, the deadline for completing Masdar City was affected by the 2008 financial crash. The scheme was to have been completed

UNITED ARAB EMIRATES – GROWTH OF A NATION 158

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

IAIN MASTERTON/ALAMY

owned by Masdar City. This scheme will be the start of the city’s first residential neighbourhood of 2,000 homes at Masdar. About two thirds of the flats in the second phase have been leased to Masdar’s institutions, but a final third of some 750 homes will be sold on the open market.

Until now, the development of the city has been led by the high-tech firms and academic institutions providing it with jobs and technology. A 16-building university campus has been built, as well as a 10,000-square-metre incubator for high-tech start-up companies. There is also a 22,000-square-metre office building for German engineering company Siemens, which has become, in effect, Masdar’s anchor tenant. This has achieved the highest rating (platinum) on the Leadership in Energy and Environmental Design (LEED) scale, making it the Middle East’s greenest office building.

Exploring commercial opportunities

by 2016, but that date has moved to between 2020 and 2025. At present, the city has created enough jobs to sustain a population of about 4,000 in 2014. Developers expect to increase that to 10,000 in three to five years, and to about 40,000 once the project is complete.

A wind tower cools the air in a courtyard at the Masdar Institute of Science and Technology

Groundbreaking ‘super-sustainable’ homes The city is about to break new ground with its first 500 ‘super-sustainable’ homes, and is looking to sell land for another 700 homes to third-party developers. At the recent Cityscape exhibition in Abu Dhabi, the city showcased the design of the homes, by UK architecture studio Woods Bagot, which will be completed by 2016.

Homes in the development have already been leased to corporations and educational establishments and are to be

Masdar is currently developing another 32,000 square metres of offices. A third of this space will be occupied by the city’s authorities, and another third by the International Renewable Energy Agency. The final third will be leased on the open market.

The commercial element of the city is also coming to life. A 316-room Hilton hotel is under construction, and the Emirates College of Technology has agreed to lease a 30,000-square-metre faculty currently being designed.

Anthony Mallows, the director of Masdar City, told The National newspaper he was confident that, within two years, the city would have doubled from its current size of 150,000 square metres to more than 300,000 square metres. He said: “The journey we have been on is to innovate and understand what it takes to build a really sustainable city on a global paradigm.”

He added that one crucial development that would be needed in the future was a link with the Abu Dhabi metro.

Meanwhile, the Masdar Institute of Science and Technology has grown into one of the mainstays of the city, and a force in the wider world. In its first five years, it has gained three approved patents, has a further 39 applications pending along with more than 60 invention disclosures. These achievements are in addition to more than 400 papers published in peer-reviewed journals.

Even more significant are the start-up companies established by Masdar Institute students. These businesses, which are based on student research, are a result of the institute’s drive to create an entrepreneurial ecosystem in Abu Dhabi. In addition, negotiations are ongoing with several national and international companies about commercial opportunities based on technological innovations by faculty members. This is an impressive start to developing the scientific infrastructure that Masdar City will need in the future, and from which other smart cities around the world can benefit.

UNITED ARAB EMIRATES – GROWTH OF A NATION 159

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Communicating potential While a few big providers dominate the telecommunications market in the United Arab Emirates, opportunities for private investors are on the rise as new dimensions to this sector emerge

HISTORICALLY, ONE COMPANY HAS PLAYED a central role in the United Arab Emirates’ telecoms market. Seven years after its establishment in 1976, a 60 per cent share of Emirates Telecommunication Corporation, or Etisalat, was acquired by the federal government of the UAE, with the remaining 40 per cent being publicly traded. Following this deal, Etisalat was tasked with building the country’s copper-wire infrastructure. In 1991, it was given the sole right to offer mobile and international services and also began acting as

the sector’s regulator. This gave Etisalat a dominant position in the market. Unlike many other national organisations that have built and operated a copper-wire network, Etisalat managed to hold on to its lion’s share after the explosive growth of mobile telephony in the mid-to-late 1990s. Indeed, it became a source of strength, as the UAE quickly became one of the highest per-capita users of mobile telephony in the world. Mobile penetration achieved a 47 per cent year-on-year growth rate in 2008, at which point average ownership reached the level of two phones for every citizen.

UNITED ARAB EMIRATES – GROWTH OF A NATION 160

RICH-JOSEPH FACUN/GETTY IMAGES

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

In 2000, Etisalat began work on creating a fibre-optic network in its home of Abu Dhabi. This programme had reached 85 per cent of all households by 2009, making the city one of the first in the world to have universal super-fast broadband coverage. Etisalat faced competition in its domestic market in February 2006, with the launch of the Emirates Integrated Telecommunications Company, which traded under the Du brand. Within four years, Du had captured 30 per cent of the UAE’s market. Etisalat responded by building up a 3G network, which by 2010

The UAE, with its tech-literate population, is an ideal market for premium services such as video over broadband

had become the fastest and the widest in the Middle East.

However, while Etisalat remains 60 per cent owned by the Emirates Investment Authority, which is in turn wholly owned by the UAE Government, Du is 39 per cent owned by the same body. Other large Du shareholders include Mubadala Development Company, an investment vehicle in which the Abu Dhabi Government has a 20.08 per cent stake, with Dubai-based Emirates Communications and Technology Company holding 20 per cent, leaving 20.92 per cent to be owned by public shareholders.

UNITED ARAB EMIRATES – GROWTH OF A NATION 161

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

UAE telecommunications industry statistics Licensees’ cash flows used in investing activities Contribution to UAE GDP Investment (AED, millions)

A third company entered the market in 2008: Al Yah Satellite Communications, which operates under the Yahsat brand. Yahsat teamed up with European firms to build and launch its first satellite from the European Spaceport in 2011, and launched a second from Russia’s facility in Kazakhstan in 2013. The entrance of Yahsat has increased competition for voice, data, video and internet services in the UAE’s domestic market as well as the wider region.

Yahsat is wholly owned by Mubadala, Abu Dhabi’s state-controlled investment vehicle.

Beyond the large carriers, there is a steadily increasing market available for companies offering targeted services.

One sub-sector that has experienced a surge in demand over the past year has been network management and maintenance. These services are often provided by firms that have developed turnkey solutions for particular kinds of business, and undertake to provide technical support and upgrade the network to improve its functionality.

12,000 10,000

9,544 7,861

7,639

4.9%

5.7%

5.15%

5%

2009

2010

2011

2012

11,890

11,528

8,000 6,000 4,000

6,372

2,000 0

Employee numbers Percentage Emirati

The region’s best-performing market Looking at the Middle East and North Africa (MENA) region, the telecoms market is expected to grow at a rate of 2.9 per cent a year to reach a size of $96 billion by 2018. According to telecoms, media and technology consultancy Analysys Mason, the countries with the best-performing markets are the UAE, Qatar and Saudi Arabia, with the UAE in the lead with a net growth rate of just over three per cent. According to the World Economic Forum, certain hotspots in the UAE, such as the resurgent Dubai, may experience growth as high as 20 per cent.

The telecoms market is split between voice, data, mobile telephony and cable broadcast services. At present, the greatest revenues in the UAE come from providing mobile services – a market that is dominated by Etisalat and Du, with each controlling an equal share. In the fixed-line, video and broadband services, however, the two carriers provide services to particular areas, and the customer does not have the option of changing from one to the other. Currently, this sub-market is dominated by

12,000

10,798

Employees

10,000

7,961

8,000 6,000 4,000

32%

33%

36%

2009

2010

2011

40%

2,000 0

2012

Source: The Telecommunications Regulatory Authority’s UAE Telecommunications Sector Developments & Indicators (2009-2012): 4th Annual Sector Review

Spending on cloud delivery in the emirates is expected to record an increase of 34 per cent Etisalat, which owns about 80 per cent of the market. In October 2013, the UAE’s Telecommunications Regulatory Authority announced that mobile phone users would be able to switch between Du and Etisalat while retaining their telephone number. However, it said that a similar deal on broadband, TV and landline packages was a long way off.

Du’s financial performance was affected by the 2008 financial crash; however, it continued to increase profits year on year. Its revenue grew from AED2.9 billion ($0.8 billion)

in 2008 to AED10.2 billion ($2.8 billion) in 2012. In terms of income streams, the company made 78 per cent of its money from mobile telephony, 16 per cent from fixed telephony, 4.3 per cent from wholesale services (trading a certain volume of its calls with other carriers that have underused infrastructure) and 1.7 per cent from broadcasting.

Etisalat is presently the largest telecoms carrier in the Middle East, with a market capitalisation of as much as AED84 billion ($23 billion) and annual revenues of more than AED14.5 billion ($3.9 billion). Initially, it reacted to the increased competition within its domestic market by embarking on a programme of acquisition in and around the MENA region, spending around $12.6 billion between 2004 and 2009 on buying up companies and licences, and establishing a presence in 19 countries. The company changed its approach at the lowest point of the global slowdown, in 2011, when Etisalat instead focused its efforts on a smaller number of markets. It pulled out of India and Indonesia, overhauled its management team and reduced its global reach to 15 countries, which together make up

UNITED ARAB EMIRATES – GROWTH OF A NATION 162

JUMANA EL HELOUEH/REUTERS

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

about 36 per cent of its current revenue. However, now that the world economy is entering a period of expansion, the company is understood to be following suit. Last year, it completed its largest deal yet with the purchase of a 53 per cent stake in Maroc Telecom from French conglomerate Vivendi at a cost of $5.54 billion.

Etisalat, the largest telecoms carrier in the Middle East, has its headquarters in Dubai

The total spending on cloud delivery in the emirates is expected to record an increase of 34 per cent year on year.

In the long term, spending is expected to expand at an annual growth rate of 44 per cent over the five-year forecast period ending in 2016.

Machine-to-machine communication

Room for private investors

Other markets on the horizon relate to the ‘internet of things’; the growth of smart grids in the distribution of electricity, gas and water; and the development of M2M (machine-to-machine) communications. These emerging areas fall on the borders of traditional engineering, IT and telecoms companies, but the opportunity is there to develop links with allied industries, in terms of both research and development, and the eventual deployment of systems.

On the other side of the ledger is the potential threat posed to telecoms operators by ‘over the top’ (OTT) services: that is, the availability of premium services such as video and telephony over low-cost broadband. A report by telecoms researcher Budde published in February 2014 noted that the UAE’s population, with its fast broadband and tech-literate population, would be a natural target for OTT video providers. In fact, Etisalat has already responded to such competition by offering the same services itself.

While these companies have a degree of market control, there is room for private investors to buy into two of the three dominant companies, which certainly have a secure base. Given that the populations of Abu Dhabi and Dubai are growing at a rate of about four per cent and the economy is expanding at about five per cent, Analsys Mason’s above-quoted prediction could be seen as conservative.

There is also the opportunity to increase demand outside the traditional service offering. Cloud computing services, for example, are expected to generate a global revenue of $5.8 billion by 2015. A recent report by IT consultancy Intergence predicted that, by 2020, as many as 80 per cent of employees could be working outside their organisation’s premises, as cloud services facilitate mobile working and virtual offices. Furthermore, according to research firm IDC, the UAE is the regional leader in this emerging sector.

UNITED ARAB EMIRATES – GROWTH OF A NATION 163

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Aiming high: mission to Mars Driven by a determination to contribute to human understanding and stand among the top countries in the field of aerospace, the UAE has announced plans to create a space agency and send an unmanned probe to Mars by 2021, marking the Arab world’s first mission to the Red Planet

“THE UAE MARS PROBE REPRESENTS THE Islamic world’s entry into the era of space exploration,” said UAE President Sheikh Khalifa bin Zayed Al Nahyan during the announcement of the UAE’s space plans in July this year. “We will prove that we are capable of delivering new scientific contributions to humanity,” he added.

Through this mission, the UAE is looking to develop its technical and intellectual capabilities in aerospace and space exploration, thereby further diversifying the economy away from petroleum and natural gas and spurring the country’s development plans. Indeed, the mission is expected to inspire thousands of Emiratis to pursue careers in the space industry and related fields, which will contribute to the country’s local talent and intellectual property pool.

The unmanned probe will travel more than 60 million kilometres over nine months, and the launch will coincide with the 50th anniversary of the country’s founding. The UAE Space Agency will oversee this mission and coordinate the country’s growing space technology sector and monitor knowledge development and transfer. While the cost of the programme has not yet been disclosed, the government has said that the UAE Space Agency will report to the Cabinet, but remain administratively and financially independent.

The UAE has become the ninth country in the world to develop a space programme for the exploration of Mars. So far, the United States has been the only one to successfully complete a long-term unmanned mission to the planet, and the States plans to send a manned mission to the planet by the mid 2030s. India’s Mars Orbiter spacecraft, launched in November last year, is expected to reach the planet’s orbit in late September 2014. China also has plans to send its own vehicle to Mars by 2020, and Japan intends to fly a manned mission to the Red Planet in the next few decades.

Little information has been released so far about the specifics of the UAE’s mission to Mars, but experts have advised the UAE to draw on past models and experiences when developing its programme. Mars orbiters tend to focus on a few core scientific studies. For example, the 2001 Mars Odyssey mission sought to detect potential water in the Martian soil, map out the surface and identify mineral

sources, and record radiation levels in a low orbit to determine the risk to humans for future missions.

Commenting on the UAE’s mission, Abdul Ismail, chief executive of UK-based consultancy Interplantery Expeditions and trustee for the International Space University (ISU), told The National newspaper it would be advisable to determine a potential gap in scientific knowledge by communicating with other space agencies about what they have done and what they plan to do.

That way, the UAE’s mission could make an original contribution to the space industry.

Experts are also recommending that the country hosts a reputed space academy course to provide a focus-group study on its Mars programme. The ISU organises a nine-week study programme every year, each time in a different country. Dr Saeed Khalfan Al Dhaheri, a former UAE University professor and now an undersecretary at the Ministry of Foreign Affairs, believes hosting an ISU programme will help promote knowledge sharing among the world’s aerospace experts, which could provide ideas for the UAE’s upcoming mission to Mars.

The mission is expected to inspire thousands to pursue careers in the space industry, developing local talent and intellectual property

Global Aerospace summit

Abu Dhabi hosted the second biannual Global Aerospace Summit this year, which drew more than 1,000 industry executives, senior decision-makers and government officials from 55 countries.

At the summit, attendees discussed the key role the UAE is set to play in the next stage of space exploration and strategies for future growth.

The global aerospace industry is said to be worth about $300 billion, and it is growing by approximately eight per cent each year. So far, Emiratis have invested more than $5 billion in developing space technology.

In April 2011, Al Yah Satellite Communications Company (Yahsat) launched its first satellite, Y1A. The satellite carries television and other commercial services to more than 64 countries, and Yahsat’s second satellite,

UNITED ARAB EMIRATES – GROWTH OF A NATION 164

STOCKTREK IMAGES INC/ALAMY

CONSTRUCTION, INFRASTRUCTURE AND DEVELOPMENT

Y1B, will offer affordable satellite broadband services to 28 countries in the Middle East, Africa and south-west Asia.

Recently, Yahsat announced plans to launch a third satellite, Al Yah 3, which, following its launch in 2016, will extend Yahsat’s satellite broadband service to Latin America.

Thuraya Telecommunications Company has also launched satellites, as has the Emirates Institution for Advanced Science and Technology (EIAST). Engineers from the UAE were involved in almost 70 per cent of the total design and build of EIAST’s latest satellite, DubaiSat-2, which was launched in November 2013 and which is currently in a 600km sun-synchronous orbit. EIAST fully owns both of its satellites.

The UAE’s mission to Mars coincides with the 50th anniversary of the country’s founding

Commercial space flights In 2009, Abu Dhabi’s Aabar Investments entered into a strategic partnership with Virgin Group, buying a 31.8 per cent equity share in Virgin Galactic – the world’s first commercial spaceline. It later raised its stake and now has a 37.8 per cent share. Virgin Galactic is in the final stages of developing and testing commercial sub-orbital space vehicles based on the SpaceShipOne, which, in 2004, flew to space and back three times.

“We are delighted to partner with Aabar in a strategic deal that is a first for Virgin Galactic. The initiative will leverage the solid financial backing of Aabar and the pioneering technology and strong global relationships of Virgin Galactic. This exciting deal is indicative of the

interesting and high-value investments that mark the UAEs commercial portfolio,” said Sir Richard Branson, founder of Virgin Group, following the deal.

Virgin Galactic’s inaugural space flight on SpaceShipTwo is due to launch from New Mexico. Commercial flights will soon follow, bearing a price tag of $250,000. While this ticket price is out of reach for many, the company’s ultimate goal is to transport passengers around the globe at a lower cost and in considerably less time that current air travel.

Aabar and Virgin have plans to build a spaceport in Abu Dhabi by 2016, but Virgin needs to be granted the necessary US export approvals before it can go ahead.

A spaceport in Abu Dhabi would make the city a global centre for the space industry.

Virgin Galactic is not the only group developing space tourism capabilities. Space Expedition Corporation (SXC), a small Dutch start-up, is one of a few private airlines gearing up to offer commercial flights to space. Although originally planning to launch commercial flights earlier this year, SXC is now aiming for 2015.

The arena of space exploration and travel remains busy, but one thing is certain – the UAE will play a key role in future of space exploration and the development of commercial space flights: “We aim for the UAE to be among the top countries in aerospace by 2021,” Sheikh Khalifa said. “We have a great belief… in the talents of our young people [and] the strongest determination, the greatest ambitions, and a clear plan to reach our targets.”

UNITED ARAB EMIRATES – GROWTH OF A NATION 165

TOURISM AND CULTURE

Abu Dhabi’s Al Jahili Fort is one of the UAE’s most famous cultural sites, and an example of the heritage that attracts visitors from around the world to the UAE

UNITED ARAB EMIRATES – GROWTH OF A NATION 166

TOURISM AND CULTURE

Seven emirates, one destination In the space of just a decade, the UAE’s spectacularly diverse tourism offering has been propelled to international prominence, and strategies to accelerate growth will ensure it continues to blossom

STRATEGICALLY LOCATED AT THE crossroads of Asia, Africa and Europe, the UAE’s geographical position, combined with its year-round sunshine, white sand and turquoise seas, have helped attract millions of tourists from across the globe.

To keep pace with rising tourist interest, the emirates are engaged in ongoing development to ensure they continue to be included in the top rankings for tourism offerings.

Underpinning the country’s tourism development, the National Council of Tourism and Antiquities was set up in 2009 with the ethos of ‘seven emirates one destination’.

Charged with representing tourism in the UAE at state level, the council plays an essential role in ensuring the complementarity of the tourism authorities’ efforts in raising industry standards and promoting the culture, heritage and diverse offerings of each emirate.

UNITED ARAB EMIRATES – GROWTH OF A NATION 167

TOURISM AND CULTURE

From desert beginnings, Dubai and Abu Dhabi are now home to five-star resorts, iconic architecture and world-class attractions that are enjoyed by millions of visitors every year. In contrast, the Northern emirates offer a more traditional experience rooted in culture, history and nature. Fujairah, situated on the east coast of the UAE, is steadily developing its tourism infrastructure and creating a strong international identity, while Sharjah has been named the Capital of Islamic Culture 2014. The smaller emirates of Ajman and Umm Al Quwain are also expanding their tourism offerings, placing emphasis on the natural beauty of their landscapes.

Meanwhile, Ras Al Khaimah, with its 64km of beaches, is also asserting itself as a tourism hotspot. Already a firm favourite with locals, the fourth largest emirate in the UAE is now tapping international markets.

Growth in tourist numbers As a whole, the country has successfully made its mark on the global map as a leading tourism destination.

According to Mark Walsh, portfolio director at Reed Travel Exhibitions, the organisers of Dubai’s Arabian Travel Market: “The UAE’s tourism map is now incredibly diverse.

The northern emirates of Sharjah and Ras Al Khaimah are building on their own cultural foundations to present a series of unique individual products that, together with Dubai and Abu Dhabi, position the country as a cohesive hospitality hub with varied appeal.”

There is no doubt that the UAE’s efforts are paying off: the country is constantly seeing tourist numbers rise, keeping pace with the addition of new hotels every year. In 2013, around 11 million people are said to have stayed in Dubai’s 594 hotels, up by 10.6 per cent on 2012, based on statistics compiled by Dubai’s Department of Tourism and Commerce Marketing (DTCM). Similarly, Abu Dhabi’s 150 hotels reported more than 2.8 million visitors in 2013 – an increase of 18 per cent on the previous year, according to Salik Manjrio, sales and marketing director at the Saadiyat-based Park Hyatt Hotel and Resort Abu Dhabi.

Thirteen hotels and hotel apartments opened in Abu Dhabi in 2013, while last year delivered close to 8.8 million guest nights, a 26 per cent increase on 2012, with total revenue soaring to $1.5 billion. The same year, Dubai saw 17 hotels open, and 2013’s impressive growth figures have put the emirate on track to oust London – which welcomes 16 million tourists annually – from the current top spot as most visited city. Over the same period, hotel and hotel apartments in Dubai posted revenues of AED21.8 billion ($5.9 billion), an increase of 16.1 per cent.

“Ten years ago, we welcomed approximately five million visitors,” said Issam Abdul Rahim Kazim, chief executive of the DTCM. “The Tourism Vision for 2020 is to welcome 20 million tourists per year to Dubai by the end of the decade. While it is an ambitious target, we believe this

Abu Dhabi’s Emirates Palace Hotel boasts lavish decorations and a 1.3km private beach

UNITED ARAB EMIRATES – GROWTH OF A NATION 168

TOURISM AND CULTURE

Fujairah Rotana Resort and Spa on Al Aqah Beach, one of many luxury complexes

will be achieved by two means: firstly by increasing Dubai’s ‘destination offering’ across events, attractions, infrastructure, services and packages, and secondly by showcasing Dubai to an even wider audience and focusing on turning awareness of Dubai into flight and hotel bookings.”

By 2015, DTCM expects around 35 additional hotels to open in Dubai. According to professional services firm EY’s Middle East Hotel Benchmark Survey Report, Dubai’s tourism market has “rapidly absorbed” the influx of new hotels and continues to perform “exceptionally well”.

This influx could also be the result of a recent government incentive. The government has encouraged more threeand four-star hotels to be constructed by waiving the 10 per cent municipality fee normally levied on visitors.

The country has successfully made its mark on the global map as a leading tourism destination Restaurants in the Ritz-Carlton Abu Dhabi Grand Canal will be run by top chefs

Hotels on the Palm Jumeirah offer access to white sandy beaches and crystal waters

In 2014, Fujairah saw the opening of three properties by leading hotel operator Accor, increasing the emirate’s room inventory by as much as 40 per cent. “Fujairah’s vast natural attractions and unique location between the mountains in the east coast have contributed significantly in making the emirate a prime tourist attraction,” His Highness Sheikh Saleh Al Sharqi, chairman of the Fujairah department of industry and economy, said during the opening of the development.

Since the Ras Al Khaimah Tourism Development Authority (RAKTDA) was established in May 2011, this emirate’s tourism industry has also taken off. “In 2011 to 2013, the number of hotel guests increased substantially, by 49 per cent,” said Steven Rice, the chief executive of RAKTDA. “Prior to then, 2010 to 2011 increased 39 per cent, so we went from 600,000 hotel guests in 2010 to 1.24 million in 2013. This year, in Q1 we have already seen a 53 per cent growth. We have a smaller base number than Dubai, but the growth is impressive and puts us as one of the fastest-growing tourism destinations in the world.”

The authority is working on a new tourism plan for the emirate. “We are in the research stages at the moment, conducting a gap analysis. By the end of the year, we will have a new master plan reaching to 2023,” explained Rice.

The benefits of Expo 2020 In November 2013, Dubai was named host of World Expo 2020 – an event that will boost tourist numbers both in Dubai and the UAE as a whole. The six-month event is expected to attract 25 million visitors, and, while money is already being spent on the necessary infrastructure, hotels and transport links, the cash return is expected to be considerable.

UNITED ARAB EMIRATES – GROWTH OF A NATION 169

ADVERTISEMENT

Discover Dubai Dubai is one of the world’s most exhilarating destinations: a glittering city that offers swathes of golden beaches, world-class shopping, dining and nightlife; hosts electrifying events and sporting championships; and, for all the family, is one big adventurous playground.

Where tradition meets ambition and renowned for its futuristic architecture, this visionary city is proud to display its rich heritage and culture. Welcome to Arabia and welcome to the destination that has made it its mission to become the world’s most visited city.

Extraordinary images of Dubai’s skyline have been seen around the world, but this is a city that must be experienced to be believed. Where else can you spend the morning on the beach, the afternoon snow skiing and the evening camel riding in the desert? Where else can you dive with sharks in a shopping mall and watch dancing fountains at the base of the world’s tallest tower? Whatever your passion, whatever your age, Dubai will never disappoint, and with many more hotels and attractions in the pipeline, no one can ever truly say they have

ticked off Dubai. It may be on the New York Times’ ‘must-visit’ list for 2014, but there will be enough new things to keep you coming back year, after year, after year.

The pace of progress in this city has been phenomenal, and it takes some believing to imagine that just 50 years ago Dubai was little more than a fishing village beside the Dubai Creek – a must-visit attraction that is currently being assessed

by UNESCO as a World Heritage Site.

multicultural and dynamic metropolis we see today. Dubai dares to dream big – and then turns that dream into reality.

Having welcomed 10 million visitors over the course of the year for the first time in 2012, the emirate declared its tourism vision in May 2013 – to welcome 20 million visitors a year by 2020 and treble tourism’s contribution to the economy.

One year later, having won the bid to host the World Expo in 2020, His Highness

Dubai is a city that is rich in heritage and increasingly making its mark on the world stage It is on this very spot that the Bani Yas tribe and the forefathers of the Maktoum dynasty settled back in the 1800s. Even in the 1950s, when the rest of the world was exploring space and New York’s Times Square had been illuminated for a good 50 years, Dubai still sat in darkness without electricity. But it was also at this time that the vision was set. The seeds of ambition were sowed and that small fishing village blossomed into the modern,

Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE, and ruler of Dubai, promised to “astonish the world”. Dubai is building on that declaration by pursuing its ambition to become the world’s most visited city, and not just a city to be seen, but a city to be experienced.

For example, shopping in Dubai is not just about making purchases, but more about amazing leisure and cultural

ADVERTISEMENT

opportunities, such as bartering for silk in a historic souk; meeting a colony of king and gentoo penguins in a shopping mall; and picking up a few hand-crafted trinkets from a market.

Dining in Dubai is not just about eating, but more about sampling cuisine from the 200 nationalities that live here. As a culinary capital, not only regionally but increasingly globally, Dubai has long caught the attention of Michelin-starred chefs and is home to some of the best tastes in the world – whether that be in its five-star hotels or in its pavement cafes.

For the sportsman and adventure seeker, Dubai is about sandboarding down a 300ft sand dune, camping in the desert, deep-sea fishing, skydiving above Palm Jumeirah and playing camel polo. And for the night owl, Dubai is about enjoying some of the hottest, trendiest and most creative nightspots imaginable.

For culture vultures, Dubai is a city that is rich in heritage and increasingly making its mark on the world stage for art, film, literature, comedy, theatre and music. For all these genres, the city hosts dedicated festivals and events, which all adds up to create a calendar that is bursting at the seams, whether it be watching the likes of The Killers under a starlit sky on

Atlantis’ Nasimi Beach, or watching to see whether it will be Federer or Djokovic to take the title at the Dubai Duty Free Tennis Championships.

Throughout the year, city-wide festivals add to the fun, from the legendary Dubai Shopping Festival, which celebrates its 20th year in 2015, to the hugely successful Dubai Food Festival, which was held for the first time in February 2014.

For families, Dubai vows to be the world’s premier family destination, continually building on its portfolio of attractions and events. Few cities offer as many attractions that appeal to all ages as Dubai does. It is here that families can dash from the ski dome to the desert; from the beach to the parks (whether that be theme parks, water parks or sprawling green parks); and from the multi-screen cinemas where butlers serve popcorn to Olympic-sized ice-skating rinks.

It is upon these propositions – family, events, art, heritage, gastronomy, nightlife, shopping, beach and marine life, and outdoor adventure – coupled with Dubai’s winning formula as a global business hub and its leading hotel and spas sector, that the Department of Tourism and Commerce Marketing is confidently able to base its tourism ambitions.

Where else in the world can you enjoy a 24-carat-gold facial in an award-winning spa, swim with dolphins, watch a world-class act on the beach at midnight, dine on Michelin-starred cuisine and feed sharks, all without leaving your hotel resort? The answer is a resounding ‘only in Dubai’.

Dubai is a city where the impossible is possible. Where you cannot help but be impressed, awestruck and mesmerised.

It is where holiday dreams come true and where remarkable memories are made for a lifetime.

Department of Tourism and Commerce Marketing P.O. Box 594, Dubai United Arab Emirates T: +971 6005 55559 F: +971 (4) 282 1131 E: info@dubaitourism.ae www.dubaitourism.ae

TOURISM AND CULTURE

According to London-based market intelligence firm Euromonitor International, $7 billion will be spent on tourism development, while the economic impact of hosting the global event is predicted to be upwards of $24 billion. Of all the tourism sub-sectors, Euromonitor International predicts that the meetings and incentives market will benefit most widely from Expo 2020, and its ramifications will be felt across not only the emirates, but also the wider Gulf Cooperation Council as it generates strong business event opportunities for the region. In addition, the firm also projects a 67 per cent spike in UAE tourism receipts by 2018.

The Beach Rotana Abu Dhabi was Rotana’s first hotel. Today, the company operates a number of hotels and resorts across the UAE

The aviation sector Dubai International, the world’s second busiest hub, is implementing a $7.8 billion expansion programme

URBANMYTH/ALAMY

Dubai’s aviation industry will also see the benefit of Expo 2020. In 2013, Dubai International, the world’s second busiest international hub, welcomed just over 66.4 million passengers, up 15.2 per cent on the previous year. Aiming to grow passenger numbers to 90 million over the next four years forms part of DTCM’s Tourism Vision for 2020, and Dubai International is implementing a $7.8 billion airport and airspace expansion programme.

Last year also saw the start of passenger operations at Al Maktoum International at Dubai World Central (DWC).

Currently undergoing phased development, the airport is set to become the world’s largest with a build-out capacity of 160 million passengers a year once fully completed.

According to Euromonitor International, the airline industry accounts for 15 per cent of national GDP. In the run-up to Expo 2020, Middle East-based airlines are set to experience an increase in business, with at least 70 per cent of the 25 million predicted visitors to the Dubai Expo expected to come from outside the UAE. Those working in the industry are positive about what Expo 2020 means for tourism in the UAE. “Not only will the increase in flight connections globally coming to or through Dubai/Abu Dhabi boost inbound traffic to the UAE, Expo 2020 is also seen as a positive affirmation that we are ready to welcome the world. The Expo will open our doors to a wider public and infrastructural preparations are under way in order to welcome into Dubai 20 million visitors per year by 2020,” said Patrick Antaki, general manager, Le Meridien Al Aqah Beach Resort and Al Maha, a Luxury Collection Desert Resort & Spa in Dubai.

The consensus is that Expo 2020 will benefit the tourism industry throughout the UAE. Wael Soueid, area general manager, Anantara Hotels, Resorts & Spas – Abu Dhabi, is optimistic that the event will benefit his hotels. “With expectations that Expo 2020 will attract around 25 million visitors to Dubai, this growth in tourism figures will undoubtedly have a positive effect on Abu Dhabi and the wider tourism market for the UAE,” he maintained.

Meanwhile, even in the northern emirates, Expo 2020 is being eagerly awaited. “Research has shown that if there’s

UNITED ARAB EMIRATES – GROWTH OF A NATION 172

TOURISM AND CULTURE

“Expo 2020 is seen as a positive affirmation that we are ready to welcome the world”

A computergenerated image of the Guggenheim Abu Dhabi, due to open in 2017

something worthwhile at the end of the journey then travelling a distance of up to two and a half hours is not an issue,” said RAKTDA’s Rice.

“We are one and a half hours from Al Maktoum. Our proximity, and the price differential versus Dubai in terms of hotel rates, will make us a good alternative option for better value.”

Aside from Expo, the UAE is looking to introduce measures that will ensure the sustainability of its tourism sector. To attract more visitors, the UAE as a whole has lifted pre-entry visa regulations on European Union member states, while Dubai has introduced legislative changes that the DTCM believes will boost the tourism sector. A fresh approach to marketing with social media at its heart is also being adopted, as Dubai utilises Instagram and Twitter to profile its many tourist attractions.

A rich variety of attractions Abu Dhabi, capital city of the UAE, is focused on the sustainability of tourism. The TCA’s mandate states that it is: “Committed to conserving, promoting and leveraging the heritage, culture and traditions of Abu Dhabi emirate. The authority is charged with supporting the evolution of Abu Dhabi into a world-class, sustainable destination of distinction.”

Culture sits central to Abu Dhabi’s tourism offering, with one of its landmark attractions being the Sheikh Zayed Grand Mosque, with its 82 domes, 1,000 columns, 24-carat-gold gilded chandeliers and the world’s largest hand-knotted carpet. Further cultural icons making their way to the emirate include the Louvre Abu Dhabi museum, set to open in 2015 on Saadiyat Island. This will be followed by the Zayed National Museum in 2016 and the Guggenheim Abu Dhabi in 2017.

And these are not the only grand projects in the UAE. In November 2010, Ferarri World opened in Abu Dhabi, featuring the world’s fastest rollercoaster, and the vast 15-hectare Yas Waterworld sits alongside. At the Venetian Village at the Ritz-Carlton Abu Dhabi Grand Canal, six waterfront restaurants are set to open as part of a new 57-acre beachfront development.

“Guests can expect to see some exciting international names coming to the UAE for the first time, both in terms of chefs and restaurant concepts,” says Julide Nuss, food and beverage manager at Abu Dhabi National Hotels, the owner of the Ritz-Carlton Abu Dhabi Grand Canal.

Marco Pierre White, Vineet Bhatia, Anil Kumar and Gary Rhodes are just some of the names that have already brought their brands to the country.

Dubai, too, has announced grand plans for a 1.8km-long project in Dubai Creek that will consist of a floating market, art galleries and shops selling Emirati handicrafts.

UNITED ARAB EMIRATES – GROWTH OF A NATION 173

We have been ranked by ICCA as among the Top 100 busiest association meetings cities, but we’re never too busy for you.

In fact, we plan to climb the rankings to the Top 50 slot in the next five years, and because you can help us get there, we’re ready to woo you with a range of compelling benefits.

You’ll find the entire city ready to get behind you.

Come to a city that’s going places.

ADCB REVISED_21x27cm.indd 1 Abu Dhabi Tourism&Culture_placed.indd 1

8/18/14 1:09 PM 18/08/2014 10:45

BURJ KHALIFAH PHOTO CLUB

TOURISM AND CULTURE

The Dubai Aquarium and Underwater Zoo is home to more than 30,000 marine creatures Dubbed ‘the world’s only seven-star hotel’, the Burj Al Arab sits on an artificial island in Dubai

An even bigger project will be the $1.6 billion Bluewaters Island mixed-use development, where the world’s largest ferris wheel – the Dubai Eye – will be located. “The Dubai Eye will serve as yet another iconic structure and will distinctively dominate the Dubai skyline,” Abdullah Al Habbai, chairman of the project’s developer, Meraas Holding, said during the launch of the project. “With its refreshing and well-appointed mix of amusement avenues, as well as dining and shopping choices, the island city will provide limitless options for smart living and leisure.”

The major sports championships and races that are hosted by the country every year are also a major draw for visitors, and recent comments from Ali Omar, director of the Dubai Sports Council’s sports development department, suggest that Dubai hopes to submit an Olympic Games host bid within the next eight years. “Sporting events contribute greatly to strengthening the UAE’s status on the world circuits as a leading international sport tourism destination: tennis, golf, Formula 1, as well as marathons, cricket, rugby, sailing and, more recently, sky diving,” says Chiheb Ben-Mahmoud, executive vice president and head of hotels and hospitality for the Middle East and North Africa region at real estate services firm Jones Lang LaSalle.

Many of the millions who come to watch sport in the UAE also take time to immerse themselves in the country’s internationally renowned shopping havens, which encompass vast malls, exclusive boutiques and traditional souks.

The Dubai Mall, which is home to the remarkable 10-million-litre Dubai Aquarium and Underwater Zoo, houses more than 1,200 shops, many of which are the retailers’ first outlets in the region, while Sharjah’s famous souks sell a vast collection of handicrafts, oriental carpets and Arabic cosmetics. The emirates are also a popular destination for those in search of jewelry, with diamonds, gold and pearls being synonymous with the Gold Souk and Gold and Diamond Park in Dubai.

Iconic hotels Dozens of high-rise hotels reside along the Sheikh Zayed Road, which runs parallel to the Persian Gulf coastline, welcoming interntional visitors.

Named after the late president of the UAE and stretching across 558.5km, Sheikh Zayed Road is the longest in the country, and home to the dazzling 830mhigh Burj Khalifa in Dubai – the world’s tallest building – which features the exclusive Armani Hotel, as well as the At.mosphere restaurant on the 122nd floor.

Other landmarks include the seven-star Burj Al Arab, which stands 321m tall on an artificial island and resembles the shape of a traditional dhow boat’s sail. The hotel boasts the underwater Al Mahara (Oyster) seafood restaurant, which features a one-million-litre seawater aquarium.

Travel and tourism is an industry that is experiencing global growth, and the UAE is well placed to continue building upon this crucial part of its economy. Tourism has already proved a game changer for the UAE, and by offering more diverse propositions for visitors, the industry will remain a sustainable contributor to the economy, thereby safeguarding its longevity.

UNITED ARAB EMIRATES – GROWTH OF A NATION 175

DIRECTORY

Investment consultants Market intelligence and risk consulting companies with United Arab Emirates expertise

ADS Securities ADS Securities’ Global Markets team handles transactions into and out of the Middle East. Its investment banking division works with clients on mergers and acquisitions, private placements, pre-IPO placements and seed capital opportunities.

ADS SECURITIES UNITED ARAB EMIRATES 8th floor, Irena Tower Corniche Road PO Box 93894 Abu Dhabi United Arab Emirates T: +971 2657 2300 E: info@ads-securities.com ADS SECURITIES HONG KONG 17th Floor, Hip Shing Hong Centre 55 Des Voeux Road Central Hong Kong T: +852 3185 0988 ADS SECURITIES SINGAPORE 8 Marina View #35-01 Asia Square Tower 1 Singapore, Singapore 018960 T: +65 6654 1500

Al Taif Investment A joint venture between Dubai Investments and Fujairah Investment Establishment offering opportunities for regional and international clients looking to invest in the United Arab Emirates.

AL TAIF INVESTMENT FUJAIRAH PO Box 8080 Fujairah, United Arab Emirates

BAIN & COMPANY MIDDLE EAST Media One Tower, Level 35 PO Box 502810 Dubai, United Arab Emirates T: +971 4365 7365

T: +971 9222 5444 E: info@altaifinvestment.com AL TAIF INVESTMENT DUBAI PO Box 28171 Dubai, United Arab Emirates T: 971 4812 2776 www.altaifinvestment.com

BAIN & COMPANY ABU DHABI Level 4, Building B, Al Mamoura Mohammed Bin Khalifa Street Muroor District PO Box 46400 Abu Dhabi United Arab Emirates T: +971 2659 4140 www.bain.com

Aon The leading global provider for risk management, which works with international financial institutions, corporations, traders and exporters, has had a Middle East base since 1985.

Delta Partners

AON MIDDLE EAST 6th Floor, Al Reem Tower Al Maktoum Street Dubai, United Arab Emirates T: +971 4202 6222

An international advisory and investment firm specialising in telecommunications, media and digital industries, covering emerging and high-growth economies, and with a network offering access to investment opportunities.

AON ABU DHABI 5th floor, Suite 502B The Blue Tower Khaleefa Street Mashreq Bank Building Abu Dhabi United Arab Emirates T: +971 2627 2777

DELTA PARTNERS DUBAI Office 2103, North Tower Emirates Financial Towers Dubai International Finance Centre PO Box 506815 Dubai, United Arab Emirates T: +971 4391 4811

AON SHARJAH 10th Floor, Corniche Plaza 1 Buhaira Corniche Sharjah, United Arab Emirates T: +971 4389 6300 www.aon.com

DELTA PARTNERS JOHANNESBURG 2nd floor, 95 Grayston Drive Morningside, Sandton 2196 PO Box 783719 Johannesburg, South Africa T: +27 1172 28500

Bain & Company With offices in Dubai and Abu Dhabi, this global management consulting firm provides advice on buyout transactions, consulting to private equity firms and institutional investors.

DELTA PARTNERS BARCELONA Avenida Diagonal 399, 4o-1a

UNITED ARAB EMIRATES – GROWTH OF A NATION 176

08008 Barcelona, Spain T: +34 9354 59310

Eagle A Dubai-based global investment and advisory group whose companies include Eagle Investments Limited, an expert in capital markets, financing and restructuring, and mergers and acquisitions advisory.

EAGLE Office S2205 Level 22 South Tower Emirates Financial Towers Dubai International Finance Centre Dubai, United Arab Emirates T: +971 4312 9000 E: info@eagle-investments.com www.eagle-investments.com

Ernst & Young A global leader in assurance, advisory, tax and transaction services with two offices in the United Arab Emirates, providing analysis, forecasting, and tax, risk, compliance and management advice.

ERNST & YOUNG ABU DHABI Nation Tower 2, Corniche Abu Dhabi 136 United Arab Emirates T: +971 2627 7522 AbuDhabi@ae.ey.com ERNST & YOUNG DUBAI 28th Floor, Al Attar Business Tower Sheikh Zayed Road PO Box 9267 Dubai, United Arab Emirates

DIRECTORY

T: +971 4332 4000 E: Dubai@ae.ey.com

A specialist financial institution offering a range of investment services, with core competencies including sovereign advisory, and mergers, takeovers and acquisition advisory.

GULF CAPITAL Al Sila Tower, 25th Floor Sowwah Square Al Maryah Island PO Box 27522 Abu Dhabi United Arab Emirates T: +971 2671 6060 E: info@gulfcapital.com www.gulfcapital.com

ESSDAR CAPITAL Unit 802, 8th floor Liberty House, Trade Centre 2 Dubai International Finance Centre PO Box 34339 Dubai, United Arab Emirates T: +971 4375 2277 E: info@essdarcapital.com www.essdarcapital.com

KPMG’s International Tax practice is part of a network of professionals who can provide advice on cross-border tax matters. The company also advises on mergers and acquisitions tax, risk consulting, and transactions and restructuring.

Essdar Capital

GFH Capital One of the Middle East’s foremost and longest-running firms for private equity investing, advising and fund management, GFH Capital was a pioneer in structured private equity investing and Islamic finance in the GCC. GFH CAPITAL 402, Level 4, Precinct Building 3 The Gate District Dubai International Financial Centre PO Box 506544 Dubai, United Arab Emirates T: +971 4365 1500 E: info@gfh-capital.com www.gfh-capital.com

Gulf Capital An alternative asset management company specialising in private equity, credit business and real estate development.

on areas including country and strategic risk, and regulation and tax structure.

PRICEWATERHOUSECOOPERS ABU DHABI 9th Floor Abu Dhabi Trade Centre Abu Dhabi United Arab Emirates T: +971 2694 6800

KPMG

PRICEWATERHOUSECOOPERS DUBAI Building 4, Level 8 Emaar Square Dubai, United Arab Emirates T: +971 4304 3100 PRICEWATERHOUSECOOPERS SHARJAH Office 1102, Al Batha Tower Al Buheirah Cornice Al Majaz Sharjah, United Arab Emirates T: +971 6597 8600

KPMG ABU DHABI Falcon Tower, 16th Floor Al Nasr Street Abu Dhabi United Arab Emirates T: +971 2634 3318

Ras Al Khaimah Investment Authority Working under the mandate of reinforcing the investment climate of the emirate and promoting its economic sectors, this government agency develops and manages Ras Al Khaimah’s industrial parks, including free zones and industrial zones.

KPMG DUBAI Level 32 Emirates Towers Sheikh Zayed Road Dubai, United Arab Emirates T: +971 4403 0300 KPMG NEW YORK 345 Park Avenue New York NY 10154-0102 United States T: +1 212 758 9700

RAS AL KHAIMAH INVESTMENT AUTHORITY Government of Ras Al Khaimah PO Box 31291 Ral Al Khaimah United Arab Emirates T: +971 7206 8666 E: info@rakinvestmentauthority. com www.rak-ia.com

PwC PwC’s consulting helps clients to operate globally, grow and innovate, while its Growth Markets Centre helps clients looking to enter into or expand in growth markets, with advice

UNITED ARAB EMIRATES – GROWTH OF A NATION 177

Rasmala A Middle East-focused investment banking group providing asset management and strategic advice for clients, including mergers and acquisitions buy-side advisory.

RASMALA Building 10, Level 1 The Gate Village Dubai International Finance Centre Dubai, United Arab Emirates T: +971 4363 5600 E: info@rasmala.com RASMALA EGYPT Smart Village F16, PO Box 133 KM 28 Cairo Alexandria Desert Road Cairo, Egypt T: +202 3537 0575 E: egypt@rasmala.com RASMALA OMAN PO Box 3233, Postal Code 112 Ruwi, Sultanate of Oman T: +968 2461 3550 E: oman@rasmala.com www.rasmala.com

Shurooq The Sharjah Investment and Development Authority is an independent government entity with investment opportunities across a range of sectors, which are designed to balance return on investment with the immediate needs of the emirate.

SHUROOQ Sharjah Investment and Development Authority PO Box, 867, Sharjah United Arab Emirates T: +971 6556 0777 www.shurooq.gov.ae

Index of advertisers Abu Dhabi Convention Bureau – Abu Dhabi Tourism & Culture Authority ............. 174 Abu Dhabi National Oil Company (ADNOC)............................................................... 116 ADCB............................................................................................................................. 180 ADIB....................................................................................................................................4 Al Dahra Agriculture..........................................................................................................6 Al Nabooda Automobiles LLC........................................................................................ 12 Al Shaheen LLC..................................................................................................................2 Anel Group.................................................................................................................... 150 CACHE............................................................................................................................. 43 Dubai Department of Tourism and Commerce Marketing......................................... 170 Dubai Islamic Bank......................................................................................................... 80 Etihad Rail....................................................................................................................... 20 FGB.................................................................................................................................. 84 Fitch Ratings................................................................................................................. 179 Horizon Energy LLC..................................................................................................... 110 KBC................................................................................................................................ 122 Kier................................................................................................................................ 146 Mashreq Bank ................................................................................................................. 98 Merali’s Chartered Accountants & Registered Auditors............................................... 10 Michael Bourgeois – Memories Arrested in Space........................................................... 16 National Marine Dredging Company........................................................................... 132 NBAD – National Bank of Abu Dhabi............................................................................ 76 Partex Oil and Gas......................................................................................................... 108 Petrofac............................................................................................................................ 18 PwC.................................................................................................................................. 32 State Street...................................................................................................................... 92 Unipart Rail..................................................................................................................... 22 Van Oord.......................................................................................................................... 15

UNITED ARAB EMIRATES – GROWTH OF A NATION 178

Knowledge Experience Insight ...there’s a world behind our ratings At Fitch Ratings, we are dedicated to providing value beyond the rating through objective and prospective credit opinions, research and data. Offering a world of knowledge and experience behind every credit rating, we transform information to deliver meaning and utility to finance and capital market professionals across the fixed-income universe. With offices worldwide, our global expertise draws on local market knowledge and the additional context and perspective we provide help finance professionals make important investment decisions with confidence.

From our capital market insights to our cross-sector expertise, at Fitch Ratings there’s a world behind our credit opinions.

www.fitchratings.com

Money can buy concrete & steel.

But ambition creates a building that defies gravity.

Corporate Banking We know that ambitious projects require a lot of capital to get off the ground. At ADCB, we work to understand the specific needs of our clients’ industries in order to provide bespoke solutions to see your projects through from beginning to completion. Learn more at adcb.com