UAE Report - 7 June 2012

sky has no limit

Art Attack

a new gateway

UAE consolidates its position as the aviation hub of the region

New initiatives to make the UAE a cultural powerhouse

Khalifa Port to revolutionise maritime industry

united arab emirates WORLD BUSINESS TIMES SPECIAL REPORt WITH THE DAILY TELEGRAPH

www.world-businesstimes.com

June 7 2012

Emirates on the road to recovery

F

ew predicted the severity of the beating the world economy would take leading up to late 2008, in an event whose descriptions have ranged from the ‘Great Recession’ to the more reassuring ‘Downturn’.

The UAE has faced many challenges in the years since, in particular the dizzying climb and spectacular fall of Dubai and the external debts owed by its government entities.

But the International Monetary Fund (IMF) says that due to its early efforts in spreading its economy away from reliance on hydrocarbons, as well as increased oil output, the UAE’s recovery is on track.

“The economic recovery looks set to continue,” an IMF delegation to the country said. “Real GDP growth reached an estimated 4.9 per cent in 2011, supported by increases in oil production. Non-hydrocarbon growth also strengthened, to around 2.7 per cent, backed by strong trade, tourism and manufacturing, and despite continued oversupply in the real estate sector.

“Real non-oil GDP growth is projected to

further strengthen to 3.5 per cent in 2012.

With limited potential for further increases in oil production in the near term, overall GDP growth is expected to moderate to 2.3 per cent. Inflation is likely to remain subdued at around 1.5 per cent this year.”

Although the fund was cautious about the outlook owing to the current geopolitical risks and global financial conditions, and specifically cited the difficulty in rolling over the external debts of the government-related entities, it was a remarkable prediction.

“Tourism, transportation and logistics have been the major drivers of recovery”

After all, the story of Dubai is still fresh in people’s mind. But the emirate managed to get up, dust itself off and start all over again.

The IMF said the UAE’s development as a major services hub lessened its dependency on oil exports, and that non-oil sectors had led the way in speeding up recovery.

Post-2009, the government has accelerated the pace of its diversification programme.

Abu Dhabi in particular is spending billions of dollars on key projects. The Urban Planning Council has launched Abu Dhabi Vision 2030. Its objective is to present a coherent picture for the future of the emirate as an environmentally, socially and economically sustainable community.

This year will see the opening of the first phase of Khalifa Port, one of the most advanced maritime facilities in the region. Next door, work is proceeding on Khalifa Industrial Zone Abu Dhabi, or Kizad. Spanning 417 square kilometres, Kizad is set to become one of the biggest industrial zones in the world.

The emirate is also set to become a leading cultural destination. Just 500 metres off the

UAE has made progress in a variety of areas but challenges still remain

Local banks gain ground The UAE banking industry has overcome an increase in both provisions for soured loans and operating expenses to record a 24 per cent rise in profits last year, a report from The Boston Consulting Group (BCG) says.

Dr Reinhold Leichtfuss, the senior partner and managing director of BCG’s Dubai office, said the performance by UAE banks and those of the wider region came as international banks were experiencing lower revenue and profit index levels, creating business opportunities for local institutions.

Revenue rose 6 per cent for banks in the UAE last year, while loan-loss provisions (LLPs) increased 4 per cent and operating expenses by 12 per cent.

Based on 2011 annual results as reported by the banks in the first quarter of this year, the study was part of BCG’s annual banking performance indices measuring the development of banking revenues (operating income) and profits for leading Middle East banks.

Overall, the banking industry in the Middle East experienced a revenue growth of 7 per cent in 2011 after revenues had stagnated the year before. Profits also increased significantly in 2011 and reached the highest level since the all-time high of 2007.

LLPs fell by 2 per cent, although a number of banks that were previously not affected and had relatively low LLPs needed to make more provisions. strong regional economies Leichtfuss said: “The performance of Middle East banks in 2011 testifies to the strength of the GCC economies and bank-

coast of Abu Dhabi city, the 27-square-kilometre Saadiyat Island is being transformed into a leisure, residential, business and cultural hub, housing premier cultural assets including Zayed National Museum, the Guggenheim Abu Dhabi and the Louvre Abu Dhabi.

Meanwhile, Dubai continues to remain a major trade and tourism destination. Its proximity to emerging markets such as China and India, and its role as a hub linking economies of the Far East, Europe, Africa and North America, has allowed it to bounce back rapidly. The emirate’s aviation industry generates $22 billion annually and the Dubai government recently said it would invest $7.8 billion to make Dubai International one of the biggest airports in the world. Its Strategic Plan 2020 is designed to boost airport capacity from 60 million to 90 million passengers per year by 2018.

All of this suggests dynamic growth for the UAE – and in today’s uncertain economic climate, that’s saying a lot.

– Reporting by Patrick Turner

Rising share Dubai is globally regarded as the region’s financial centre, but lenders from oil-rich Abu Dhabi are catching up quickly.

“Total bank deposits in the UAE rose by 1.5 per cent month-on-month and 1.9 per cent year-onyear in December 2011 to 1.07 trillion dirhams ($288.6 billion). Bank lending in the same period surged 3.8 per cent year-on-year,” a recent Dubai International Financial Center Authority report said.

But the time seems to be over when Dubaibased banks grabbed the lion’s share of the UAE banking sector’s volume.

“Abu Dhabi banks’ assets are getting closer to accounting for half of the UAE banking system, up from about 34 per cent at the start of 2008,” Dr Giyas Gokkent, Chief Economist and Head of Research at National Bank of Abu Dhabi, said.

Investment attraction

ing systems. Furthermore, this performance is set against the backdrop of lower revenue and profit index levels among international banks. This widening gap means that despite some continuing challenges, the leading banks in the GCC can leverage this partial withdrawal of international banks to gain market shares and expand footprints.”

While banks in Saudi Arabia, UAE, Ku-

wait and Bahrain had healthy revenue growth rates between 4 per cent and 8 per cent in 2011, the banking systems in Oman and Qatar grew revenues by 11 per cent and 22 per cent, respectively. In addition, banks in all countries, except in Kuwait and Oman, achieved double digit aggregate profit growth rates.

– Reporting by Ronald Kaiser

The Urban Planning Council in Abu Dhabi has selected Al Maryah Island (formerly Sowwah Island) to be the capital’s new central business district. A mixed-use development, Al Maryah will be a major catalyst in the city’s drive to achieve the Urban Structure Framework Plan objective of environmental, economic and social sustainability by 2030.

The district will have a working population of 75,000 and will be home to 30,000 residents. It will feature parks and open spaces, art galleries, community centres, high street and high-fashion retail names, designer boutiques and an array of street cafés and restaurants.

Sowwah Square, the island’s signature business district, is already complete, and a host of high-profile tenants are moving in.

The anchor tenant, the Abu Dhabi Securities Exchange, is expected to be up and trading by the end of the year.

sky has no limit

Art Attack

a new gateway

UAE consolidates its position as the aviation hub of the region

New initiatives to make the UAE a cultural powerhouse

Khalifa Port to revolutionise maritime industry

united arab emirates WORLD BUSINESS TIMES SPECIAL REPORt WITH THE DAILY TELEGRAPH

www.world-businesstimes.com

June 7 2012

Emirates on the road to recovery

F

ew predicted the severity of the beating the world economy would take leading up to late 2008, in an event whose descriptions have ranged from the ‘Great Recession’ to the more reassuring ‘Downturn’.

The UAE has faced many challenges in the years since, in particular the dizzying climb and spectacular fall of Dubai and the external debts owed by its government entities.

But the International Monetary Fund (IMF) says that due to its early efforts in spreading its economy away from reliance on hydrocarbons, as well as increased oil output, the UAE’s recovery is on track.

“The economic recovery looks set to continue,” an IMF delegation to the country said. “Real GDP growth reached an estimated 4.9 per cent in 2011, supported by increases in oil production. Non-hydrocarbon growth also strengthened, to around 2.7 per cent, backed by strong trade, tourism and manufacturing, and despite continued oversupply in the real estate sector.

“Real non-oil GDP growth is projected to

further strengthen to 3.5 per cent in 2012.

With limited potential for further increases in oil production in the near term, overall GDP growth is expected to moderate to 2.3 per cent. Inflation is likely to remain subdued at around 1.5 per cent this year.”

Although the fund was cautious about the outlook owing to the current geopolitical risks and global financial conditions, and specifically cited the difficulty in rolling over the external debts of the government-related entities, it was a remarkable prediction.

“Tourism, transportation and logistics have been the major drivers of recovery”

After all, the story of Dubai is still fresh in people’s mind. But the emirate managed to get up, dust itself off and start all over again.

The IMF said the UAE’s development as a major services hub lessened its dependency on oil exports, and that non-oil sectors had led the way in speeding up recovery.

Post-2009, the government has accelerated the pace of its diversification programme.

Abu Dhabi in particular is spending billions of dollars on key projects. The Urban Planning Council has launched Abu Dhabi Vision 2030. Its objective is to present a coherent picture for the future of the emirate as an environmentally, socially and economically sustainable community.

This year will see the opening of the first phase of Khalifa Port, one of the most advanced maritime facilities in the region. Next door, work is proceeding on Khalifa Industrial Zone Abu Dhabi, or Kizad. Spanning 417 square kilometres, Kizad is set to become one of the biggest industrial zones in the world.

The emirate is also set to become a leading cultural destination. Just 500 metres off the

UAE has made progress in a variety of areas but challenges still remain

Local banks gain ground The UAE banking industry has overcome an increase in both provisions for soured loans and operating expenses to record a 24 per cent rise in profits last year, a report from The Boston Consulting Group (BCG) says.

Dr Reinhold Leichtfuss, the senior partner and managing director of BCG’s Dubai office, said the performance by UAE banks and those of the wider region came as international banks were experiencing lower revenue and profit index levels, creating business opportunities for local institutions.

Revenue rose 6 per cent for banks in the UAE last year, while loan-loss provisions (LLPs) increased 4 per cent and operating expenses by 12 per cent.

Based on 2011 annual results as reported by the banks in the first quarter of this year, the study was part of BCG’s annual banking performance indices measuring the development of banking revenues (operating income) and profits for leading Middle East banks.

Overall, the banking industry in the Middle East experienced a revenue growth of 7 per cent in 2011 after revenues had stagnated the year before. Profits also increased significantly in 2011 and reached the highest level since the all-time high of 2007.

LLPs fell by 2 per cent, although a number of banks that were previously not affected and had relatively low LLPs needed to make more provisions. strong regional economies Leichtfuss said: “The performance of Middle East banks in 2011 testifies to the strength of the GCC economies and bank-

coast of Abu Dhabi city, the 27-square-kilometre Saadiyat Island is being transformed into a leisure, residential, business and cultural hub, housing premier cultural assets including Zayed National Museum, the Guggenheim Abu Dhabi and the Louvre Abu Dhabi.

Meanwhile, Dubai continues to remain a major trade and tourism destination. Its proximity to emerging markets such as China and India, and its role as a hub linking economies of the Far East, Europe, Africa and North America, has allowed it to bounce back rapidly. The emirate’s aviation industry generates $22 billion annually and the Dubai government recently said it would invest $7.8 billion to make Dubai International one of the biggest airports in the world. Its Strategic Plan 2020 is designed to boost airport capacity from 60 million to 90 million passengers per year by 2018.

All of this suggests dynamic growth for the UAE – and in today’s uncertain economic climate, that’s saying a lot.

– Reporting by Patrick Turner

Rising share Dubai is globally regarded as the region’s financial centre, but lenders from oil-rich Abu Dhabi are catching up quickly.

“Total bank deposits in the UAE rose by 1.5 per cent month-on-month and 1.9 per cent year-onyear in December 2011 to 1.07 trillion dirhams ($288.6 billion). Bank lending in the same period surged 3.8 per cent year-on-year,” a recent Dubai International Financial Center Authority report said.

But the time seems to be over when Dubaibased banks grabbed the lion’s share of the UAE banking sector’s volume.

“Abu Dhabi banks’ assets are getting closer to accounting for half of the UAE banking system, up from about 34 per cent at the start of 2008,” Dr Giyas Gokkent, Chief Economist and Head of Research at National Bank of Abu Dhabi, said.

Investment attraction

ing systems. Furthermore, this performance is set against the backdrop of lower revenue and profit index levels among international banks. This widening gap means that despite some continuing challenges, the leading banks in the GCC can leverage this partial withdrawal of international banks to gain market shares and expand footprints.”

While banks in Saudi Arabia, UAE, Ku-

wait and Bahrain had healthy revenue growth rates between 4 per cent and 8 per cent in 2011, the banking systems in Oman and Qatar grew revenues by 11 per cent and 22 per cent, respectively. In addition, banks in all countries, except in Kuwait and Oman, achieved double digit aggregate profit growth rates.

– Reporting by Ronald Kaiser

The Urban Planning Council in Abu Dhabi has selected Al Maryah Island (formerly Sowwah Island) to be the capital’s new central business district. A mixed-use development, Al Maryah will be a major catalyst in the city’s drive to achieve the Urban Structure Framework Plan objective of environmental, economic and social sustainability by 2030.

The district will have a working population of 75,000 and will be home to 30,000 residents. It will feature parks and open spaces, art galleries, community centres, high street and high-fashion retail names, designer boutiques and an array of street cafés and restaurants.

Sowwah Square, the island’s signature business district, is already complete, and a host of high-profile tenants are moving in.

The anchor tenant, the Abu Dhabi Securities Exchange, is expected to be up and trading by the end of the year.

2

united arab emirates

June 7 2012

Nuclear at the core of urgent energy action utilities UAE will invest $40 billion in the sector over the next decade, writes George Wilson The UAE has seen rapid growth in industry and population during the past decade.

Due to the increased power demands of households, and construction, manufacturing and oil and gas industries, utility companies in the country face the exceedingly difficult task of having to increase power capacity and infrastructure.

Abu Dhabi Water and Electricity Authority estimates that power and water demand will increase by up to eight per cent in the next five years, and Dubai Electricity and Water Authority (DEWA) expects similar growth.

To address the issue, the government is investing almost $40 billion in power and water projects over the next decade.

The most important of these projects is the Braka nuclear facility in Abu Dhabi.

Currently, natural gas is used as feedstock

Tapping a new source

The UAE is forging ahead with plans to build four nuclear plants.

The programme is being overseen by Emirates Nuclear Energy Corporation (ENEC).

Despite being one of the world’s largest oil and gas exporters the UAE is seeking to diversify to meet its growing energy demands – estimated

for new power plants, and the UAE has 214.4 trillion cubic feet of proven reserves, making it the seventh largest globally. The development of nuclear energy will allow much of the new electricity generation to be free of natural gas.

“Nuclear energy will be an important part of the energy mix for the UAE,” said Nick Carter, Director General of the Abu Dhabi based Regulations and Supervision Board (RSB). “It has some major advantages over gas-burning plant. For example, it is low carbon, highly efficient and has low fuel costs. A plant can last for up to 60 years.”

Carter says the utilities industry in the UAE has changed a great deal over the past decade. “The sector was unbundled (divided into different parts) in 1999, so this was a major change,” he said. “We also introduced private equity into the sector by building the first in-

at an additional nine per cent a year until 2020 by ENEC. It has awarded a $20 billion contract to a consortium led by the Korean Electric Power Corporation, the world’s third-largest nuclear energy firm.

The scheme is being monitored by the UAE’s Federal Authority for

Nuclear Regulation, which will ensure the programme adheres to international standards.

The UAE’s approach has been described as the “gold standard”

by Gareth Evans, a co-chairman of the International Commission on Nuclear Non-Proliferation and Disarmament.

dependent power and water plant.”

According to Carter, RSB is evolving to keep pace with the changes. “To some extent we must react to the world we regulate, and when this changes we need to change as well,” he said. “A good example of this is the introduction of wastewater as a regulated activity in 2005. In this regard, the bureau hired experts in wastewater collection and treatment and broadened its skills economically and legally, to deal with this change. In most cases, though, we seek to influence the sector where possible so we are well prepared for future changes.”

Carter said Abu Dhabi Vision 2030 lays

Abu Dhabi Chamber of Commerce and Industry – driving competitive business environment Abu Dhabi enjoys a prime position in the region as a leading centre of business. Many of the world’s largest companies have established their presence in the emirate, attracted by its healthy business environment. Abu Dhabi offers companies a range of investment opportunities, while creating the right business and legislative environment for investors to work and grow their respective enterprises.

The Abu Dhabi Chamber has been an important component in the UAE capital’s strategic plans to position itself as the leading destination for major regional and international companies.

Through its efforts, it has managed to attract major international companies which are critical to the realization of Abu Dhabi’s Economic Vision of 2030, which will establish a common framework for aligning all policies and plans that contribute to the ongoing development of the emirate’s economy, fully engaging the private sector in their implementation.

Ever since it came into being in 1969, the Chamber has been supporting the government’s endeavor of promoting Abu Dhabi as an economical industrial hub in the region. The Chamber has made rapid strides since then, achieving outstanding results in 2011 – both in terms of increasing its membership as well as services provided to companies in Abu Dhabi.

The number of registered members in ADCCI increased to more than 95,000 in 2011 from 84,911 recorded at the end of 2010. The ADCCI Members Service Center for members was able to serve 15% more customers compared to the previous year, mainly due to the quality of services it provides. The number of people who have benefited from the services provided by the Centre so far has exceeded 250,000.

ADCCI has been working with key partners in Abu Dhabi to boost foreign investments and promoting services and facilities through its participation in Arab, regional and international exhibitions specialized in business and investment. Besides, it hosted commercial delegations frequently as part of this effort – 70 of them in 2011 alone. In addition, it also organised a total of 48 events which consisted of conferences, workshops and specialised seminars.

“During the course of the last year, ADCCI has doubled its efforts to support Abu Dhabi’s economy in an effort to achieve the vision of our wise leaders to position the emirate as a leading business destination,” says Mohammed Hilal Al Muhairy, Director General of ADCCI. “In fact, this vision perfectly fits in with the aspirations of the private sector to play a greater role in the current economic boom. Our effort will be to continue to develop policies and strategies that will help ADCCI retain its standing as a key player in driving development in Abu Dhabi,” he adds.

ADCCI has long realized that the partnership between private and public sectors is a fundamental part of the Abu Dhabi Economic Vision 2030. In fact, the Vision 2030 is the result of a concerted effort among a number of public sector and joint public-private sector entities.

Recognising this critical role, the ADCCI has to helped enhance the competitive business environment in Abu Dhabi in cooperation with official corporations and private companies. It has reinforced the business sector’s development through its initiatives, and has created the favourable circumstances for the private sector to contribute in full measure to the growth of the Abu Dhabi economy.

“Abu Dhabi is fast emerging as a regional business hub and gateway for global players today, mainly driven by a competitive business environment that attracts investment from all over the world. It is in this context that the ADCCI is spearheading the participation of business enterprises in the emirate’s economic

H.E Mohammed Hilal Al Muhairy Director General of ADCCI

growth and helping them become a part of the success story,” says Al Muhairy.

ADCCI also signed several agreements and memoranda of understanding (MoU) last year to simplify business procedures, especially those related to establishing new projects or developing existing ones.

In supporting the private sector, the ADCCI enables companies to benefit from the services and investment opportunities that Abu Dhabi offers. Among those services are internet facilities that are provided via the website, and provision to complete transactions and applications online, which have helped investors in a big way save time and efforts.

In 2011, ADCCI witnessed the graduation of a number of UAE nationals who were part of the Abu Dhabi International Center for Organisational Excellence (ADICOE), a subsidiary of ADCCI. ADICOE aims to strengthen both private and public sector organizations’ ability to compete, by building strong human competencies, and at the same time contributing towards the process of Emiratisation.

According to economic studies, Abu Dhabi continues to achieve growth as the average growth rate in the GDP of the Emirate exceeds 14% from 2001 to 2009. The Emirate was successfully able to attract foreign investments reaching AED 100 billion from 2003 to 2010.

Abu Dhabi is also focusing on developing sectors that have the potential for growth to reach its targeted annual growth rate of 7.5%, which in its turn will help the Emirate to diversify its economy. The most prominent sectors include minerals, aviation, defense, pharmaceuticals, biotechnology, tourism, healthcare, transportation, trade, logistics, media, financial services and telecommunications.

ADCCI forecasts show that Abu Dhabi will experience a growth of 4.5% in 2012, which is in line with the path of growth accomplished by the emirate for years. Remarkably, this kind of growth is being achieved despite of the fact that the global financial crisis is still affecting many countries.

All the forecasts that have been developed for the economy of the emirate reflect the progress and strength that Abu Dhabi had achieved. The emirate was successfully able to attract more than US$ 27 billion in foreign investments from 2003 to 2012.

Today ADCCI has come a long way and its role does not just revolve around management work and licences. Much of its efforts go towards supporting investors with information on investment opportunities and also providing them with counselling and advice based on various economic studies, making the Chamber an essential element in the mechanism to realize the economic vision of the emirate’s leaders.

“Vision 2030 addresses certain issues such as renewable energy generation and the need to maintain independent regulation.”

Nick Carter, Director General Regulations and Supervision Board

out specific plans for the sector. “It addresses certain issues such as renewable energy generation and the need to maintain independent regulation,” he said. “But the sector’s planning horizons are linked more to the next seven years rather than the next 18. This is because we can always react to change in seven years.”

united arab emirates

www.world-businesstimes.com

3

Captains of government and business profiles The UAE has seen unprecedented development in recent years. Here are some of the power brokers wielding the most influence Sheikh Mohammed Bin Zayed Bin Sultan Al Nahyan

Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces A more public face of the leadership than his brother Sheikh Khalifa, Sheikh Mohammed also looks after much of the day-to-day business. He heads the emirate’s widely diversified investment company Mubadala, which has 88 billion dirhams (£15.73 billion) in assets under management.

Nasser Al Sowaidi

Chairman of Department of Economic Development, Abu Dhabi, and National Bank of Abu Dhabi

Sheikh Khalifa Bin Zayed Al Nahyan President of the UAE and Ruler of Abu Dhabi

Sheikh Khalifa, 64, is the head of the Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund. ADIA does not reveal its total assets, but they have been estimated to be about $630 billion. Much of that comes from crude, of which the emirate holds proven reserves of 97.8 billion barrels.

Al Sowaidi’s department is charged with helping to achieve the Abu Dhabi Vision 2030, which aims to create a sustainable economy without dependence solely on oil and gas.

Last year he led the National Bank of Abu Dhabi to a net profit of 3.7 billion dirhams (£656.5 million).

Khaldoon Khalifa Al Mubarak

Fatima Al Jaber COO, Al Jaber Group

CEO, Mubadala

Under Al Mubarak’s watch Mubadala, a strategic investment company owned by the Abu Dhabi Government, has moved into a wide range of areas including property, microchips, aerospace and hospitality. He is also Chairman of Manchester City FC, the reigning English Premier League champions.

Al Jaber is a pioneering businesswoman in the region.

As Chief Operating Officer of the Abu Dhabi-based group, she manages more than 50,000 staff and manages about $4.9 billion in assets. She is the first woman elected to the board of directors at the Abu Dhabi Chamber of Commerce.

Industry titans

Other market movers in the limelight

Sheikh Mohammed Bin Rashid Al Maktoum

Vice President and Prime Minister of the UAE, and Ruler of Dubai.

Sheikh Mohammed heads Dubai Holdings, a company that manages and controls companies across a broad spectrum of sectors. Its operating company, Dubai Holding Commercial Operation Group, announced a 60 per cent jump in net profits to 240 million dirhams (£42.59 million) last year from 2010.

Sheikh Ahmed Bin Saeed Al Maktoum

Chairman and CEO, Emirates Airline & Group The uncle of the Ruler of Dubai, Sheikh Ahmed is also head of the Dubai Civil Aviation Authority and Dubai Airports. He is the Chairman of the Dubai Supreme Fiscal Committee, and in late 2010 was appointed Chairman of Dubai World, the government conglomerate that had earlier begun restructuring about $24 billion in debt.

AMBITION. WITHOUT IT, THIS WOULD ALL STILL BE A DESERT.

Sheikh Hamed Bin Zayed Al Nahyan is the Managing Director of the Abu Dhabi Investment Authority (ADIA) and Chairman of Etihad Airways, which last year flew 8.3 million passengers for an earlier than expected maiden profit of $14 million.

Also on the board of ADIA is Sheikh Mansour Bin Zayed Al Nahyan, a Deputy Prime Minister who heads the International Petroleum Investment Council – with reported

total assets last year of $48 billion – owns the English football club Manchester City and bought a stake in Richard Branson’s Virgin Galactic.

In the neighbouring emirate, Sheikh Hamdan Bin Mohammed Al Maktoum, the Crown Prince of Dubai, is also Chairman of the Dubai Executive Council.

Sheikha Lubna Al Qasimi, the Minister for Foreign Trade, is a member of the Sharjah Royal Family and the

first woman to hold a ministerial position.

Abu Dhabi National Oil Company is one of the world’s biggest oil companies, with estimated revenues of $75 billion. Its Chief Executive is Abdulla Nasser Al Suwaidi.

Ahmed Al Sayegh is the Chief Executive of the gas company Dolphin Energy, which late last year celebrated the cumulative production of its 3 trillionth cubic foot of natural gas from its field off Qatar.

Under the leadership of Ala’a Eraiqat, Abu Dhabi Commercial Bank’s CEO, the lender posted a net profit of 3.08 billion dirhams last year, up from 391 million in 2010.

Sultan Al Jaber heads Abu Dhabi’s sustainable energy company Masdar, which has built its carbon-neutral city on the edge of Abu Dhabi Island, and the Abu Dhabi Ports Company, which is spending $5 billion on the Khalifa Port and Industrial Zone.

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4

united arab emirates

June 7 2012

line. Concourse 3, which is part of Terminal 3, is expected to be completed by the end of this year, and will be for Emirates’ A380s.

With the opening of Concourse 3, the airport’s capacity will increase to more than 80 million passengers annually.

Dubai International will be complemented

by Al Maktoum International Airport (Dubai World Central International Airport), a new 140-square-kilometre airport that will help handle the influx of travellers well into the future.

Changes in the air Aviation The UAE is investing hundreds of billions in the sector, writes Jim Crane

T

o understand the critical role played by the aviation industry in the UAE, one only needs to read the numbers: Aviation contributes 61.3 billion dirhams ($16.6 billion) (6.2 per cent) to the country’s GDP. According to a report produced by the consultancy Oxford Economics, the sector also provides 84.5 billion dirhams ($23 billion) through ‘catalytic’ effects in other sectors such as tourism.

Given aviation’s outsize role in the economy, it comes as no surprise that the government plans to spend 500 billion dirhams ($136 billion) on the sector over the next 10 years. In the pipeline are new aircraft, huge investments to improve airport capacity and plans for Abu Dhabi to become a regional centre for aircraft maintenance, manufacturing and flight training.

The majority of these developments will take place in Abu Dhabi and Dubai.

Major hub Dubai International airport is a major aviation hub and home base of Emirates airline and the low-cost carrier flydubai.

In 2011 the airport handled a record 50.98 million passengers, an eight per cent increase over the 2010 fiscal year.

This made it the 13th busiest airport in the world by passenger traffic and the fourth busiest by international passenger traffic.

Dubai International opened the new $4.5 billion Terminal 3 in October 2008. It was built exclusively for the use of Emirates air-

Private aviation

the Private aviation business in the Middle East is expected to experience growth of 20 per cent this year.

Wajdi Al Idrissi, Managing Director of Saudia Private Aviation (SPA), said Saudi Arabia is the biggest private aviation market in the region, representing approximately 75 per cent of the total and seven per cent of the global market. He said Saudi Arabia will be the “main hub for private aviation and business demands”, and that

Ambitious Although Dubai has a head start on Abu Dhabi in the aviation sector, the UAE capital is fast catching up. Abu Dhabi launched Etihad Airways in 2003. In less than a decade, the airline has built a network that spans 84 destinations in 52 countries. This year it is expecting to carry 10 million passengers, about 19 per cent up on 2011.

Meanwhile, Abu Dhabi Airport, Etihad’s home base, saw passengers more than double in six years from 5.3 million in 2006 to 12 million in 2011. It currently has a capacity to handle 12.5 million passengers annually, but this should rise to 47 million when the Midfield Terminal Complex is completed in 2017.

“Our business model of organic growth combined with codeshare partnerships and strategic equity investments is powering our business forward,” said James Hogan, President and CEO of Etihad.

SPA has had to buy new jets to cope with the demand.

“SPA is now the world’s largest operator of the Dassault Falcon 7X. The aircraft have played an important role in our growth,” he said.

Abu Dhabi Aviation (ADA), which offers helicopter services and also has a private aviation arm, expects a 20 per cent increase in its business.

ADA Chairman Nader Al Hammadi said there is a high demand for

helicopter services in the international oil and gas sector, which is still expanding. Asked whether the global slowdown had any effect on his business, he said: “On the contrary, the demand for our services increased worldwide.”

Meanwhile, Royal Jet, owned by ADA and the Presidential Flight Authority, posted its best ever first quarter in 2012. President and CEO Shane O’Hare predicts 15 per cent growth this year.

Defence sector aims to change perceptions THE UAE, one of the world’s biggest importers of weapons, has joined a select group of nations that exports defence and security equipment.

The Government’s decision to diversify the economy and set up high-tech industries has led the country to establish its own defence sector.

Tawazun Economic Council and its sister company, Tawazun Holding, are two of the corporate entities helping to expand the UAE’s defence manufacturing industry.

“The GCC has been the largest defence buyer in the world in the past 30 years,” said His Excellency Saif Mohamed Al Hajeri, Chief Executive of Tawazun Economic Council and Tawazun Holding.

“Therefore, there are tangible advantages to companies in the industry having a base here.”

Those advantages include being in the same time zone as customer, having more localised products and shared language and culture.

Tawazun forms partnerships with world-class companies and has 12 subsidiaries that design, engineer and make sophisticated defence industry products in the Emirates.

“It is not just about the technology and expertise they [the partners] can bring to the table – it is even down to the personnel involved,” Mr Al Hajeri says. “We consider factors such as whether they are just looking for pure commercial benefit or are willing to give something back, too.”

The corporation has opened the

Tawazun Industrial Park to provide a secure environment for precision manufacturers. The park offers a “plug and play” service with shared facilities.

All of these activities are helping to build the national workforce.

More than 55 per cent of the workforce at Tawazun factories is local and it comprises a substantial number of women.

“Building capability in the UAE is at the very heart of Tawazun’s mission,” Mr Al Hajeri said. “We recognise that we have a local workforce for whom working in industry remains a new concept and so we are investing heavily in people with a view to creating a sustainable future.

“By doing this we are opening up new opportunities to them and making them proud to work in industry. This is what will help change local attitudes.”

National development, acquisition of high-tech skills and building of new facilities: the UAE’s homegrown defence industry has come a long way – but the journey is not finished yet.

– Reporting by Wes Martin

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5

Insurers willing to take more risks

A new gateway trade New port to give major boost to the UAE economy, writes John Hammersmith

W

hen the first phase of Khalifa Port opens on September 1, 2012, it will, together with Khalifa Industrial Zone Abu Dhabi (Kizad), change the ports and free zone industry in the region.

The projects, which are being developed

by Abu Dhabi Ports Company (ADPC), represent a major investment (more than $7 billion so far) for the government.

“Khalifa Port is one of the world’s most technologically advanced ports and Kizad is set to be one the largest industrial zones on the planet; both are in the advanced stages of commissioning with the finishing line in sight for opening in Q4 2012,” said Tony Douglas, CEO of ADPC. Khalifa Port is being constructed on a reclaimed port island situated more than four kilometres out to sea. When the first phase opens, the port will offer an annual capacity of two million containers a year and eight million tonnes of bulk and break bulk cargo.

Construction will continue until 2030, by which time the entire development will be able to handle 15 million 20ft equivalent

units and 35 million tonnes of bulk cargo.

And that’s just the port. Kizad, at the time of writing, is four times the size of Abu Dhabi Island. It is divided into two zones: Area A and B. Area A, which has already been launched, is spread over 51 square kilometres. By the time Area B is inaugurated the whole development will cover 417 square kilometres.

Kizad’s business plan underpins Abu Dhabi’s goal to increase GDP fourfold by 2030, generating $418 billion from non-oil and gas sectors. Its role in this target will see it responsible for 15 per cent of this figure.

While not all of these industries will be housed in true vertically integrated clusters, each is expected to contribute significantly to Kizad’s success. Waseem Freij, Engineering Manager at Kizad, said: “There is probably no other place in the world where this kind of development is taking place. Abu Dhabi Vision 2030 sets out clearly the steps we need to take to diversify our economy and ensure a sustainable future. Kizad and Khalifa Port will go a long way in meeting those goals.”

The region’s insurance industry sees great promise in the resolve of Gulf countries to diversify their economies away from sole dependence on hydrocarbons.

“This region is primed for growth,” says Walid Sidani, the Chief Executive of Abu Dhabi National Insurance Company (ADNIC). “With petrodollars backing GCC economies, we see continued – if not increasing – investment in infrastructure and construction, as well as associated megaprojects.

“State and nationwide goals – from Abu Dhabi’s Vision 2030 to Dubai’s Strategic Plan 2015 – will also back nonenergy sectors such as tourism, education and logistics. Qatar’s foray into the global sporting arena has resulted in tenders for new projects.”

Mr Sidani’s company was the first to win a licence in what has become a highly competitive market since ADNIC began operations in 1972.

“The UAE sector is crowded, with a total of 61 companies (33 local, 28 foreign), in both the conventional and takaful, or Islamic insurance sector, with the gross written premium of 24 billion dirhams,” he says.

“There are also approximately 175 insurance brokers and 21

“Customers are now looking increasingly for ‘value for money’ products.”

insurance agents, which dominate the distribution channels in the UAE.” He says the gross written premium, the equivalent of £6.5 billion, represents about 2 per cent of the country’s economy.

But the number of companies making up the local sector is not the only change. Industry firms are less averse to risk, and the customers are demanding more.

“The industry has evolved over time from initially being cautious to taking more risks,” Mr Sidani says. “This change has been accelerated by the recent financial crisis as companies are now focusing increasingly on technical profit and are less reliant on investment income.

“The growth of takaful has also increased the customer base, especially those who were reluctant to take insurance for religious reasons.

“Customers are now looking increasingly for ‘value for money’ products and placing greater emphasis on service quality,” he adds.

The country’s insurance penetration over the past five years has been at an average of 1.8 per cent, a figure Mr Sidani says will grow in the near-tomedium term. The new focus on profits and the introduction of laws governing the sector will lead to other changes.

“We expect some pricing adjustments in the near future as insurance companies will now concentrate more on technical profits,” he says.

“The near-to-medium-term will see a definite focus on consumer lines, with continued attention paid to commercial business and the introduction of more innovative products with enhanced service quality.

“We expect that with the implementation of new laws, the insurance market will be more regulated. There will be moves to strengthen solvency and capitalisation across the board, resulting in financially sustainable operations. The market might see some consolidation.”

– Reporting by Megan Long

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united arab emirates

June 7 2012

telecom companies ring in the changes Telecom Operators invest in high-speed fibre networks to improve their offerings, writes Tom Byrd The UAE has one of the Gulf’s most developed telecommunications networks. With a youthful, largely transient population of expats and visitors, take-up of mobile and broadband services is high, but the market is characterised by a lack of competition.

All internet and telephone services are regulated by the Telecommunications Regulatory Authority (TRA).

It oversees the UAE’s two service providers, Etisalat and du, which each offer mobile, landline and broadband services.

Etisalat, which is 60 per cent owned by the government, saw its monopoly broken in 2007 when Emirates Integrated Telecommunications Company, or du, became operational.

Dubai-based du now claims 46 per cent of UAE mobile subscribers.

Smartphone take-up is high, and the market is expected to grow as mobile data pric-

Telcom in numbers

150% Mobile penetration in the UAE

es fall and 4G networks are utilised. TRA Director General His Excellency Mohamed Al Ghanim said: “Smartphones are a potential area of significant opportunity given the UAE’s very high mobile penetration rates – over 150 per cent as of February 2012.

“As fixed line and internet services markets become more competitive we would expect to see growth in bundled offerings and also increases in the internet speeds to which residential customers and businesses subscribe.”

UAE residents have little choice with regard to fixed line and broadband services as the choice of provider is largely governed by location.

Al Ghanim said: “When du entered the fixed line services market it sought out customers in locations where Etisalat did not have an established market presence. This means that, today, du focuses on certain ge-

46% 100mbps

$40

du’s share of Home customer download the UAE market speeds offered by BT Monthly entry-level

broadband fees

60% 30mbps Fastest download speed that Etisalat can provide Government’s stake in Etisalat

ographic locations and Etisalat on others.”

He said both operators had invested heavily in high-speed fibre networks, which is expected to lead to growth in data services.

Consumer broadband fees in the UAE are among the most expensive in the world, with monthly entry-level subscriptions costing as much as 149 dirhams ($40). In May, Etisalat slashed its broadband charges and promised further price cuts, marking a new era of competition with rival du.

The operator said it had cut the price of its basic broadband package in the UAE and hoped to entice users away from slower internet connections running at 256 kilobits per second (kbps) and 512kbps.

It’s hoped that the planned liberalisation of the market will cause prices to fall further.

Global market Leader Abu Dhabi Aviation (ADA) is the largest commercial helicopter operator in the MENA Region as well as the parent company of an aviation group offering VVIP jet charter and heavy jet cargo operations spanning the globe.

The Company continues to grow its bottom line through its expansion in a number of international markets and local MRO (Maintenance, Repair and Overhaul) enterprises.

Abu Dhabi International Airport – Abu Dhabi, UAE Tel: +971 2 5758000 Fax: +971 2 5757775 Email: adava@abudhabiaviation.com Website: www.abudhabiaviation.com

The telecom infrastructure in the UAE has undergone a rapid upgrade

Broadband in the UAE is slow by international standards. The fastest download speed Etisalat can provide is 30 megabits per second (mbps); BT, in contrast, offers home customers download speeds of up to 100mbps.

Al Ghanim outlined the steps TRA is taking to improve matters. He said: “The telecommunications infrastructure in the UAE has undergone a tremendous update in recent years as the predominantly copper infrastructure was replaced by fibre-optic connections running either all the way to customers’ premises or to multi-tenant buildings.

“This means services up to 100mbps can be offered to residential and corporate customers depending on the maximum speed of the inside wiring of the building.”

Explosion in new products and services the uae’s two telecommunications carriers are in a good place. The country has one of the world’s highest mobile phone penetration rates and the region’s best internet connectivity.

But Osman Sultan, the Chief Executive of du, says there are two factors in taking advantage of such a situation, and in the process fulfilling the company’s ambitions of further parity with rival Etisalat, and growth of between 4 and 5 per cent this year and next.

“We believe innovation in products and services, and orientation towards customers will be the key differentiators,” he says.

“This will be supplemented by GDP growth, thanks to the vision of the leadership of the country and emergence of the UAE as one of the most important business hubs in the world.

“Some of the promising areas of growth are in mobile broadband, managed services, cloud-based services and a segmented approach to customers. Mobile services allow business to operate with greater efficiency.These services improve socioeconomic aspects of society, improve access to health care and help improve user’s quality of life.”

The contribution by the telecom sector to the UAE economy rose to 5.3 from 4.1 per cent between 2007 and 2010, according to a report from the Telecommunications Regulatory Authority released in May last year.

Mr Sultan cites a study by Ericsson, Arthur D Little and the Chalmers University of Technology that shows doubling broadband speed in a country increases its GDP by 0.3 per cent.

“The UAE has the best broadband connectivity in the region,” he says. “According to a study conducted by ARCChart, du has the best overall mobile broadband performance in the Middle East and Africa.”

Mr Sultan moved to Dubai to help to set up du, also known as Emirates Integrated Telecommunications Company, which opened for business in 2006.

He worked with France Telecom

from 1983, and in 1998 became chief executive of MobiNil in Egypt after helping it to win its GSM licence.

“The role of telecom is changing … now other data-driven services are being provided and changing the way people interact (such as chat and email),” Mr Sultan says.

“Also, applications into health, government and security, among many more, are changing the way

“The UAE has the best broadband connectivity in the region.” we interact as individuals or groups or do business as companies, corporations or government institutions.

“On the other hand, value chain overlaps between a handset vendor and an operator are increasing mainly due to the advent of smartphones and tablets.”

He says du, at least for now, is maintaining its one-country strategy. “du’s core strategy is centred around the UAE market,” Mr Sultan says. “At this stage we are only exploring the opportunity of expanding internationally through MVNO (mobile virtual network operator) ventures and the potential for generating incremental value for the shareholder.

“However, at this point in time, we are only assessing the attractiveness of different countries and regions.”

– Reporting by Dan Cliff

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A work of art, for art’s sake

culture UAE’s cultural scene is about to get a lot hotter, writes Lauren Steadman

S

Clockwise from top: Abu Dhabi Corniche, a traditional dance, an aerial view of Abu Dhabi and Yas Island

World business times

un, sand and shopping attract millions of tourists to the UAE each year, but it is rarely perceived as a cultural destination.

In a bid to broaden its appeal, a raft of prestigious arts venues are being built to woo visitors with more highbrow tastes.

The centrepiece project is Abu Dhabi’s Saadiyat Island.

This vast offshore complex is already home to the impressive Zayed National Museum, designed by Lord Norman Foster, and will eventually be joined by Frank Gehry’s Abu Dhabi Guggenheim, Jean Nouvel’s Abu Dhabi Louvre and The Performing Arts Centre, a multipurpose space designed by British-Iraqi architect Zaha Hadid.

Abu Dhabi’s government-run Tourism Development and Investment Company (TDIC) has been commissioned to transform the island into a world-class leisure and business hub.

Chairman His Excellency Sheikh Sultan bin Tahnoon Al Nahyan said: “Saadiyat Cultural District will create a destination that will repeatedly attract visitors from the world of arts and culture.

“The museums will facilitate the development of cultural leaders and experts through education and employment, creating fulfilling career opportunities for UAE nationals.

“In turn this will integrate culture and arts into the daily life of the community, assisting to value, sustain and preserve the cultural heritage.”

Saadiyat Retreat, Saadiyat Reserve, Saadiyat Marina, Saadiyat Promenade and Saadiyat Lagoons.

But six years after the project was unveiled, progress is slow, as financial concerns have seen the opening dates pushed back – the Louvre is set to open in 2015, three years later than planned.

Fears of censorship and the treatment of migrant workers building the complex have led to more than 130 artists, many of them prominent in the Middle East, to call for a boycott.

TDIC has responded by announcing it will monitor labour practices on the island, but the pressure group Gulflabor says more needs to be done.

The investment in culture forms part of Abu Dhabi Economic Vision 2030, a plan to

reduce the UAE’s dependence on oil.

Neighbouring Qatar has taken a similar approach to diversifying its economy, snapping up famous works of art and building several museums.

Over the past seven years the ruling Al Thani family is thought to have spent at least $1 billion on Western painting, sculpture and installations, including a version of Paul Cézanne’s The Card Players for over $250m and works by Mark Rothko, Francis Bacon and Damien Hirst.

The drive has been led by the Amir’s daughter Sheikha Mayassa Al Thani, recently named the art world’s most powerful woman by The Economist.

Qatar Museums Authority, which Sheikha Mayassa heads, has formed a partnership with University College London to deliver postgraduate training in archaeology, museum studies, cultural heritage and conservation; she is also behind the Doha Tribeca Film Festival, a sister event to the established annual event in New York.

Museums aren’t the UAE’s only tourist

attractions, and the luxurious resorts and theme parks for which it is renowned remain as popular as ever. Multi-million-dollar visitor attractions such as Ferrari World and Yas Marina Circuit, home of Abu Dhabi Grand Prix, have helped put Abu Dhabi firmly on the international map, with the annual number of hotel guests rising from 960,000 in 2004 to more than 1.5 million today.

Just three years ago, Dubai tourism bosses said their target of attracting 15m international tourists by 2015 was achievable despite the difficult global economic outlook.

But Dr Cedwyn Fernandes, associate professor in business studies at Middlesex University Dubai, has argued the tourist industry should look east to attract visitors and place more emphasis on the budget end of the market.

He said: “The tourism authority in Dubai should focus its marketing plans on attracting tourists from the Arab countries and Indian sub-continent. Moreover, tourist facilities should also be designed to cater to the needs of the Arab and Indian subcontinent visitors.”

Saadiyat Island will be accessible via two major highway bridges linking it with the mainland and divided into seven zones – Saadiyat Cultural District, Saadiyat Beach,

World Business Times World Business Times is a global organisation that provides integrated media, marketing and communication services. It offers a bridge across print and digital media that connects governments, companies and individuals to potential markets and investors worldwide.

This report was compiled by WBT and distributed with The Daily Telegraph to an international audience.

WBT’s readership consists of decision-makers, business and political elite, academics, policy makers and business readers.

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