March 8, 2008

Abu Dhabi, Thriving in Challenging Times

Keeping Plan 2030 on track

Abu Dhabi’s Plan 2030, one of the world’s most innovative and comprehensive urban-development programs, is set to move ahead as anticipated in spite of the challenge posed by the global financial crisis. Abu Dhabi’s government, typically proactive, is determined to keep the momentum going as it implements ambitious projects that will transform Abu Dhabi from an oil-based to a knowledge-based economy.

Proactive approach to maintaining liquidity

The government’s injection on February 4 of AED 16 billion (USD 4.36 billion) into five of its banks is just one sign that Abu Dhabi will do what it takes to keep Plan 2030 on track. When it announced the move, Abu Dhabi’s Department of Finance commented, “Given current global economic conditions, the government believes that this strategic initiative is an appropriate and proactive response to ensure that the strong confidence in Abu Dhabi’s financial institutions is further enhanced.” The five banks are Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Gulf Bank, National Bank of Abu Dhabi and Union National Bank.

Abu Dhabi shares closed at their highest level for almost two weeks after the capital injection. The ADX Banks and Finance Index climbed 4.7 percent while Abu Dhabi’s ADX General Index gained 1.7 percent. The recent move followed the UAE government’s decision to provide USD 32.6 billion in emergency funding facilities for the financial sector in September 2008. The government continues to guarantee all bank deposits, a strategy that is reassuring foreign investors.

New mortgage lender

In November 2008, in another move to keep Plan 2030 going forward, the government announced that Abu Dhabi would launch a new mortgage lender backed by Mubadala, the government-run development agency, to

revive the housing market in case liquidity dries up during the credit crisis. The new lender, Abu Dhabi Finance, is a joint venture between Mubadala, Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and the Tourism Development and Investment Company. This move aims to counteract the current trend among many local and foreign banks in the Gulf region to be more cautious in their lending and to cut certain credit lines in reaction to the global financial crisis.

Other Abu Dhabi lenders are continuing to finance private-sector projects. Abu Dhabi-based Khalifa Fund will inject funding into 100 new projects in Abu Dhabi in 2009 involving small and medium-sized enterprises (SMEs) and growth sectors such as manufacturing and tourism, according to Dr. Halah El Sokari, the fund’s Director of Strategy and Planning. He recently commented, “Despite the financial crisis and business slowdowns in other places in the region and the world, nothing has changed in our five-year strategic plan. We are continuing to inject funding into SMEs this year and plan to go on doing so every year over the next five years. We will also be introducing an equity participation model in the form of a venture-capital fund. We would like to promote enterprises in the priority sectors outlined in the Abu Dhabi Plan 2030.”

Strong off-plan sales indicate economy still thriving

One proof that Abu Dhabi’s economy is still going strong in spite of the global downturn is that, in contrast to Dubai, Abu Dhabi is continuing to pull in increasing off-plan property sales. While the Dubai market is regarded as saturated, in Abu Dhabi demand for space is still huge and the supply currently absent. Abu Dhabi has also been delivering better price appreciation over the past 12 months than Dubai has, according to industry analysts.

The building boom will continue, Abu Dhabi’s leaders insist. “Projects now underway, as well as many which have not yet been announced, will fulfill Abu Dhabi’s potential as a vibrant and productive capital city,” says Falah Al Ahbabi, General Manager of the Urban Planning Council (UPC), the organization mandated to oversee Plan 2030’s implementation.

Concerning fears that global financial problems will cause difficulties in achieving Plan 2030’s goals, Al Ahbabi says, “Inflation, regardless of how severe it is, will have no effect on the 2030 strategy and neither will any recession in the U.S. economy, as inflation is accompanied by an increase in oil prices. Besides, recession, even if temporary, means the existence of very large amounts of money searching for investment opportunities. These sums might be in India, China or here in the UAE, which is one of the most stable countries in the Middle East.”

Plan’s long-term vision not affected by short-term events

Other Abu Dhabi leaders agree that Plan 2030 will move forward. H.E. Nasser Ahmed Alsowaidi, Chairman of the Abu Dhabi Department of Planning and Economy (DPE), commented in a speech at the end of January 2009, “The long-term nature of Vision 2030 ensures that the transformation of Abu Dhabi’s economy will be unaffected by short-term economic events. The current drop in the price of oil is not expected to impact the plan’s realization, as the baseline data used for the forecasts take into account market fluctuations and oil-price volatility. The economic diversification targets set by the plan will continue to reduce volatility in Abu Dhabi’s economic performance and its vulnerability to fluctuations in future economic cycles.”

Targeted sectors offer investment appeal

Alsowaidi believes that Abu Dhabi should achieve real GDP annual growth of 7 percent through 2015 and of 6 percent between 2015 and 2030 to ensure that Plan 2030’s goals are met. He identified infrastructure and services, human-resource development and financial development as key to the plan’s success, and added that public-private partnerships as well as foreign investment will be essential in achieving these initiatives.

The government has chosen to focus on sectors in which Abu Dhabi has or can develop a competitive advantage; these are energy, chemicals, metals and mining, aviation, aerospace and defense, pharmaceuticals, bio-technology and life sciences, hotels, restaurants and services and healthcare equipment and services. In addition, the government is targeting regional focus sectors like transportation, trade and logistics, education, media, financial services and telecommunications. All these sectors represent outstanding opportunities for international investors.

Massive construction underway or planned

Plan 2030 calls for the creation of more than 500,000 residential units as well as related infrastructure, including schools and hospitals; a sevenfold increase in the number of the emirate’s hotel rooms, which currently total 10,000; more roads and public-transport facilities; a new port; an industrial zone at Taweelah; expansion of Abu Dhabi International Airport; new special economic zones; and a new high-speed passenger and freight railway, among many other initiatives that will help cope with Abu Dhabi’s expected population and tourism growth over the next two decades.

Private sector continuing to launch new projects

Meanwhile, Abu Dhabi’s private sector continues to move forward in launching new projects. Al Qudra Holding recently inaugurated the region’s first academy in the Middle East North Africa region that provides real-time simulation of industrial facilities. The Emirates Simulation Academy (ESA), developed with an investment of AED 80 million (USD 22 million), is a joint venture between Al Qudra, the Center of Excellence for Applied Research and Training of Higher Colleges of Technology, and GSE Systems (US). “At a time when our region is especially reliant on oil, gas, and other energy sectors, ESA fills a critical role by being the main opportunity for professionals to be trained on emergency situations,” commented Mahmood Al Mahmood, CEO of Al Qudra Holding.

Estidama, Plan 2030’s cornerstone

Plan 2030 includes many “green” projects, and these are definitely going forward since they are key to the plan’s overall success. As the UPC’s General Manager Al Ahbabi comments, “Sustainability is central to the work of the UPC, and a key element of Plan Abu Dhabi 2030. In fact, the cornerstone of Plan 2030 is the Estidama initiative.” Estidama, which means “sustainable” in Arabic, is an ambitious integrated program to devise guidelines and regulations for sustainable, green design, operation and maintenance of all types of buildings and communities throughout Abu Dhabi.

Stimulus package a possibility

Projects like these require massive investment, but the government is confident that this investment will be forthcoming. As Alsowaidi said in his recent speech, “The Abu Dhabi government believes that the growth targets set by Plan 2030 are achievable. Even if the Emirate misses an annual growth target in an adverse year, this will not impact the ultimate achievement of the plan’s long-term growth and diversification targets. In addition, in any year of good growth, Abu Dhabi will easily exceed the set annual growth target.”

Would Abu Dhabi’s government create an economic stimulus package as other countries are doing to keep their economies on track? Al Suwaidi indicated this could happen. He said, “The Abu Dhabi government will do all that is necessary to assist in achieving the growth and diversification targets set by Plan 2030. Any actions that may be required to support economic activities in the coming period will be announced in due course.”

Plan 2030 seems certain to become yet another Abu Dhabi success story.

Al Qudra Holding

“Advancing Abu Dhabi’s Private Sector.”

Despite current market conditions, Abu Dhabi remains one of the fastest growing cities in the world. The city and the country’s success, usually associated with the production of crude oil, are also based on the government’s strategy to have a well-diversified economy.

Leading Abu Dhabi-based investor, Al Qudra Holding, stands out as the private company dedicated to realizing a similar vision of investing across sectors. Steady, long-term investment in fundamental sectors is critical for overall development of the Emirate and the region. Mahmood Ebraheem Al Mahmood, CEO of Al Qudra Holding states, “At a time like this, the most important thing to do is to try to maintain steady growth as realistically as possible in the most essential areas.”

Al Mahmood leads a large team of industry professionals who monitor all macro and micro changes in the market, enabling the company to adapt to dynamic needs and make strategic investment decisions that are consistent with demand. Al Mahmood emphasizes that the company pursues projects and processes that add sustainable value and focuses on establishing strategic relationships. As Al Mahmood states, “As the Middle East develops, Al Qudra is leading the way – we are the pioneer in this process. What differentiates Al Qudra Holding is our value-creating investment opportunities and our ability to deliver what we promise.”

Like the UAE, a major reason behind Al Qudra Holding’s success lies in its strategic investment across many sectors. “We have created several companies that focus on five main sectors that will achieve the right diversification to meet regional needs. Additionally, we are complementing other leaders in the region, particularly in Abu Dhabi” says Al Mahmood.

Al Qudra Holding provides integrated solutions for the real estate industry, infrastructure development, utilities production and distribution, industrial production, and agriculture. The Holding also encompasses many ventures from various industries including healthcare and education. Al Mahmood believes it is Al Qudra’s ability to combine solutions vertically and horizontally among the sectors that give the company the flexibility and adaptability to address the unique needs of the market and community.

Success is also driven by innovation and investment in people, continues Al Mahmood, “We want to pioneer new technologies and more efficient methods thus ensuring that, in all our developments and companies, we are always at the leading edge and promoting the highest standards. We are also investing in finding and developing the best people, including local talent.” Taken together, Al Qudra’s integrated, multi-sector strategy plus its investment in innovation and talent will be key building blocks for future success.

Al Qudra’s innovation is reflected in all of the company’s projects. Al Qudra’s wellness-themed Ain Al Fayda development in Al Ain is a groundbreaking, innovative housing development that has been singled out for its sustainability, innovation and future-focused design. In agriculture, Al Qudra has pioneered technologies that are helping to dramatically increase farming productivity in order to close the food gap in the region.

Being an exemplary corporate citizen also underscores Al Qudra’s commitment to the region. Al Mahmood believes that Al Qudra Holding should focus on win-win solutions in which the company should give back to those communities and regions in which it operates. The solutions that the company provides must also promote deeper success by transferring proper knowledge and skills.

Al Mahmood also emphasises the fact that all of Al Qudra’s initiatives are in line with the government of Abu Dhabi 2030 plan and the success of Al Qudra’s operations demonstrates that Abu Dhabi’s economy remains healthy with plenty of room for investment to be done by the private sector. With this in mind, Al Qudra is the benchmark for any private investment in the region.

Looking to the future, Al Qudra will continue to establish ventures that add value to existing operations by building integrated competencies. Going forward, Al Mahmood expands, “We want investors to know that we are not just local or regional; we are enhancing our presence throughout MENA and becoming increasingly global. We aim to be an international brand and to ensure quality in all we do. I am excited about the future and, in particular, the new talent we will be working with, because talent breeds talent. At Al Qudra, we embody foresight and entrepreneurship. We want to be known as a leading portal for strategic investment.”