Middle East Policy Council

Journal Essay

Abu Dhabi's New Economy: Oil, Investment and Domestic Development

Christopher Davidson

Summer 2009, Volume XVI, Number 2

Dr. Davidson is a fellow of the Institute for Middle Eastern and Islamic Studies at Durham University. He is a former assistant professor of political science at Sheikh Zayed University in Abu Dhabi and a visiting associate professor at Kyoto University in Japan. He is the author of The United Arab Emirates: A Study in Survival; Dubai: The Vulnerability of Success, and the forthcoming Abu Dhabi: Oil and Beyond.

At the helm of the United Arab Emirates federation, Abu Dhabi powered into the twenty-first century on theback of ever-increasing oil revenues, well-established petrochemical industries, and massive oil-financed overseas investments. For the foreseeable future and despite worsening global conditions, these sectors and strategies will remain the central pillars of the emirate’s economy; Abu Dhabi will continue to be a major oil producer and to control the world’s greatest sovereign wealth funds. And since 2004, its dynamic new leadership has also begun to diversify the economy. By maximizing Abu Dhabi’s competitive advantages and reaching out to the most capable foreign partners, a plethora of new sectors have been launched. These include high-technology heavy industries, a pioneering renewable-energy sector, extensive real-estate projects, and up-market “cultural tourism.” Having been carefully selected and nurtured, these sectors will be responsible within a few years for a potent and vibrant new economy providing plentiful employment and domestic investment opportunities. Unlike the more urgent and seemingly problematic diversification that has taken place in Dubai and elsewhere in the Gulf, Abu Dhabi’s astutely managed economic development should allow the emirate to carve out a high-profile and sustainable niche, even during this time of global financial crisis.

THE OIL AND GAS ECONOMY

With several major discoveries since the 1970s, both onshore and off, Abu Dhabi’s share of global oil reserves has continued to grow and now stands at about 8 percent: some 98 billion barrels, which represents about 94 percent of the UAE total.1 Production currently averages 2.7 million barrels today, but the Supreme Petroleum Council has recently invested over $20 billion in oil infrastructure with a view to expanding Abu Dhabi’s capacity by 30 percent to nearly 3.5 million barrels per day by 2010. Almost all of this excess will be sold to Asian buyers.2 Even at this higher rate, and assuming no further discoveries, it is estimated that Abu Dhabi’s reserves will still last another 90 years.3

The early days of one or two major concession holders are long gone. Today, several foreign companies hold stakes in Abu Dhabi’s oil industry, including British Petroleum (BP), the inheritor of Abu Dhabi interests in the old Iraqi Petroleum Company, as well as Campagnie Française des Petroles, Royal Dutch Shell, Exxon Mobil, Total and the Japan Oil Development Company (JODCO). Most of the foreign companies keep renewing their stakes, with some already extended until 2026.4 It is believed that their expertise and technological input continue to be welcomed. Since 1971, a “national” oil company — the Abu Dhabi National Oil Company (ADNOC) — has always held a controlling stake in the various concessions. ADNOC holds a 60 percent stake in the largest onshore concession, the Abu Dhabi Company for Onshore Oil Investments (ADCO); a 60 percent stake in the largest offshore concession, the Abu Dhabi Marine Areas company; and a 51 percent stake in the Zakum Development Company (ZADCO), another major offshore concession holder.5 In any case, there are handsome profits for all concerned, with Abu Dhabi’s total oil exports in 2007 estimated to have been worth over $260 billion.6 Of this, it is thought that ADNOC’s share was $67 billion, a figure likely to have risen to nearly $90 billion during the price hikes of 2008.7 Even in 2009, with prices predicted to average little more than $50 a barrel, ADNOC revenues are expected to exceed $45 billion.8

Although its gas reserves are not comparable to those elsewhere in Gulf, especially those of Qatar, Abu Dhabi nevertheless controls a sizeable 3.4 percent of the world’s natural gas: some 200 trillion cubic feet.9 As is true of the oil industry, the major offshore concession holder — the Abu Dhabi Gas Liquefaction Company (ADGAS) — is majority-owned by ADNOC, which holds a 70 percent stake, while the remainder is divided among BP, Total and Mitsubishi Gas.10 Similarly, the major onshore concession holder, Abu Dhabi Gas Industries (GASCO), is majority owned by ADNOC, which holds a 68 percent stake, while the remainder is divided among Total, Royal Dutch Shell and Partex.11 In the near future, a new concession to be shared by ADNOC and Conoco-Phillips will exploit untouched areas of the Shah and Bab onshore gasfields.12 Although controversial, given the reportedly high sulfur and carbon-dioxide content of Shah’s gas,13 this will boost Abu Dhabi’s current daily gas production of about 4.5 billion to nearly 6 billion cubic feet per day.14 And by the end of 2009, GASCO will have completed the final phase of the Habshan Gas Complex, one of the world’s largest gas plants.15 Despite these increases, Abu Dhabi will still face gas shortages, as some 85 percent of the emirate’s power plants are gas fuelled.16 These shortages have already stalled major development projects, including the construction of an Abu Dhabi-financed desalination plant in the poorer emirate of Umm al Qawain,17 and it seems that construction projects in the capital itself have been slowed down because of this. Hope for a solution had been pinned on the massive Dolphin Gas project, which established Qatar as a cosupplier and committed Abu Dhabi to the large-scale transportation and marketing of Dolphin gas to Dubai, Oman and other net importers in the region.18 However, despite 2 billion cubic feet per day of Dolphin gas now being piped in from Qatar,19 the problem has not yet been solved.

The long-term plan is the acquisition of, or at least access to, gas from much further afield. Abu Dhabi would export its hydrocarbon expertise, satisfy its own energy needs, and perhaps even re-export non-Gulf gas to its more resource-scarce neighbors. Notably, following closely in the footsteps of an Omani deal to exploit Iranian gas fields,20 Abu Dhabi’s Mubadala Development Corporation has acquired Singapore-based Pearl Energy, which in turn holds concessions to exploit Indonesia’s Sebuku gas field and the Jasmine field in the Gulf of Thailand. And through its Liwa Energy subsidiary company, Mubadala has also bought into hydro-carbon-exploration companies in Algeria and Libya.21 Similarly, other Abu Dhabi entities have bought into overseas explorations, including the Abu Dhabi National Energy Company (referred to as Taqa energy), which now has a stake in North Sea and Canadian operations,22 and the International Petroleum Investment Company (IPIC), which has developed an interest in Kazakhstani gas discoveries.23

OIL-RELATED INDUSTRIALIZATION

In addition to some basic agricultural developments and small-scale import-substitution industries, most of which have concentrated on producing basic construction materials since the first oil boom, Abu Dhabi has established heavy, state-owned export-oriented industries. Most of these have concentrated on the production of metals, plastics, fertilizers and petrochemicals. These all require abundant energy to manufacture and therefore best capitalize on Abu Dhabi’s competitive advantages. The most prominent of these downstream industrial companies are Fertil, established in 1980 and co-owned by the ADNOC and Total;24 the Abu Dhabi Polymers Company, or Borouge (established in 1998);25 and Emirates Aluminium (EMAL), which operates the world’s largest aluminium-processing facility on Abu Dhabi’s man-made Taweelah island. Most of these exports are believed to be destined for India, Bangladesh, Sri Lanka and Malaysia.26

As with the hydrocarbon industry, over the next few years the sector will continue to expand, gas shortages notwithstanding, with both the Mubadala Development Corporation and the Abu Dhabi Basic Industries Corporation (ADBIC), planning to build massive new aluminium plants.27 By 2013, IPIC will have built a new Chemicals Industrial City. Capable of producing 7 million tons per year of aromatics and ammonia derivatives, it will be the world’s largest such complex.28 Also, ADBIC is planning to invest a further $4 billion into its Abu Dhabi Polymers Park. By 2011, it is expected that this will have led to a doubling in the emirate’s polymers production.29 Other projects will include those belonging to the new Emirates Iron Company, the Emirates Cement Factory and the Al-Nasser Industrial Enterprises parastatal.30 The government has put its full weight behind these developments, having increased spending on industrial infrastructure by over 400 percent since 2001.31 Soon it promises the completion of the $10 billion Khalifa Port and Industrial Zone on Taweelah and has committed a further $8 billion for other sector-specific infrastructure projects.32 A new unit, ZonesCorp, has been set up to administer these new districts, provide organizational support and build residential camps for laborers.33

OVERSEAS INVESTMENTS AND SOVEREIGN WEALTH

Of equal, if not greater, importance to Abu Dhabi’s economy since the 1970s has been the channeling of surplus oil revenues into long-term overseas investments rather than simply gold or short-term paper. Conceived as a means of buffering the domestic economy in case the international oil industry falters, most of these investments have been made through a handful of government-owned authorities or government-backed companies. Indeed, most of the latter simply state that their sole shareholder is “the Government of Abu Dhabi.” Today, their combined assets are thought to be in excess of $1 trillion, and until last year, they were generating some 10 percent in annualized returns.34 This compares very favorably with the world’s other sovereign-wealth-managing countries, notably Singapore and Norway, with $490 billion35 and $390 billion,36 respectively. It places Abu Dhabi far ahead of other Gulf investors such as Kuwait, with $260 billion;37 Dubai, with about $100 billion;38 and Qatar, with a modest $60 billion.39

By far the most prominent of Abu Dhabi’s sovereign wealth funds is the Abu Dhabi Investments Authority (ADIA). Founded in 1976, it reached about $100 billion in overseas assets by the mid1990s40 and about $360 billion by 2005.41 Now symbolically housed in the tallest building in Abu Dhabi, the Samsung-ADIA complex,42 it has been estimated that ADIA reached nearly $900 million in early 2008.43 Although there may have been a slight drop by the end of the year as the global recession continued to worsen,44 it is likely that ADIA is still the world’s largest sovereign wealth fund. Following Sheikh Khalifa bin Zayed Al Nahyan’s succession as ruler in late 2004, the chairmanship formally passed from Khalifa to a younger half brother, Sheikh Ahmad bin Zayed Al Nahyan. In 2006, ADIA technically came under the umbrella of a new entity called the Abu Dhabi Investments Council;45 in practice, however, it appears to remain fairly autonomous, with Khalifa, Ahmad and a long-serving French banker46 in full control of the purse strings. Deploying teams of foreign experts to scour the globe for a variety of opportunities, ADIA has historically favored index-linked blue-chip investments in the developed world. These fairly conservative investments are believed to still make up about 60 percent of ADIA’s portfolio, the most recent example being the acquisition of a 5 percent stake in Citigroup. This $7.5 billion investment in 2007 made ADIA the largest shareholder in the largest U.S. bank and came just months after it had taken a 9 percent stake in Apollo, a leading U.S. management firm. Moreover, as part of the same strategy, the authority has long been building up considerable investments in mature Western real estate, with its UK portfolio alone valued in excess of $6 billion.47 About 30 percent of the portfolio is in emerging markets, including Southeast Asia and some parts of the Arab world. Recent examples include ADIA’s acquisition of an 8 percent stake in the Egyptian Financial Group Hermes Holding Company (EFG-Hermes) and a large stake in the giant Prince Abdul-Aziz bin Musaid Economic City in Saudi Arabia.48 Of the remaining 10 percent of the portfolio, little information is available, although it would seem that most fall under the control of ADIA’s new strategic investments department, which is headed by the same astute manager as the emerging-markets division.49 Examples of ADIA’s strategic “wild card” investments may include a reported $5 billion investment in Libya’s tourism infrastructure.50

Also now nominally under the Abu Dhabi Investment Council is the Abu Dhabi Investment Company (ADIC). Established in 1977, it is the second-oldest and second-largest sovereign-wealth manager in Abu Dhabi, believed to control over $15 billion in overseas investments.51 Historically, it has been under the control of the Suwdan section of the Bani Yas tribe,52 and today this remains the case; Khalifa bin Muhammad Al-Kindi and Nasser bin Ahmad Al-Suwaidi serve, respectively, as its chairman and deputy chairman. ADIC specializes in North African investments,53 but in the last few years, it has begun to diversify its interests and has, like ADIA, seen value in depressed Western real estate. Notably, in July 2008, it bought out Prudential’s 75 percent stake in the iconic Chrysler Building in New York. Valued at about $800 million, the deal was reported in the international media as being brokered by ADIC,54 although, confusingly, on this occasion it appeared that the acronym referred to the parent Abu Dhabi Investment Council.55

Abu Dhabi’s third sovereign wealth fund is managed by the International Petroleum Investment Company. Originally founded in 1984 as an expertise-combining joint venture between ADIA and the Abu Dhabi National Oil Company, it remains co-owned by the two entities but now falls under the umbrella of the Supreme Petroleum Council. Nevertheless, it has an independent board of directors56 (now chaired by Sheikh Mansur bin Zayed Al Nahyan) that has successfully built up IPIC’s overseas oil-related investment portfolio to nearly $14 billion. Some of its biggest investments include a 17 percentstake in Österreichischen Mineralölverwaltung Aktiengesellschaft (OMV), a major Austrian petrochemicals company,57 and a 65 percent controlling stake in Borealis,58 a plastics company also based in Austria that has links with the Abu Dhabi Polymers Company. More recently, IPIC has invested in Japan’s oil-refining industry by purchasing a 21 percent, $780 million, stake in the Cosmo Oil Company.59 And, in addition to its above-mentioned interests in Kazakhstani explorations, IPIC announced plans in 2008 to invest $5 billion in a petrochemicals plant in the Central Asian country.60 Over the next five years, IPIC is projected to increase its portfolio to an estimated $40 billion.61

Capturing many more headlines than either ADIC or IPIC has been Abu Dhabi’s fourth-largest but probably fastest-growing sovereign-wealth manager. Founded in 2002 by the soon-to-be crown prince, Sheikh Muhammad bin Zayed Al Nahyan, the Mubadala Development Corporation is staffed by members of the same team involved in the early stages of the Dolphin Gas project. Many of them were handpicked for the purpose by Muhammad, most notably Mubadala’s esteemed managing director, Khaldun bin Khalifa Al-Mubarak, and its CEO, Waleed bin Ah-mad Al-Mokarrab Al-Muhairi of the Al-Bu Mahair section of the Bani Yas. Although Mubadala still serves as Dolphin’s majority shareholder62 and — as indicated by the described Pearl Energy acquisition — clearly keeps an interest in hydrocarbon projects, since 2005 it has diversified considerably into a variety of other overseas investments. Most of these are overseen by its investment-management group63 and are already believed to be worth over $10 billion.64 Most conspicuously, in 2005 Mubadala purchased a 5 percent stake, worth $130 million, in Italy’s celebrated Ferrari car manufacturer. But there have been other, much larger, investments: a 7.5 percent stake worth $1.3 billion in the Carlyle Group, a U.S.-based private-equity giant; an 8.3 percent stake in the Guinea Alumina Corporation, whose refinery is adjacent to one of the world’s highest-quality bauxite reserves; an 8.1 percent stake worth $620 million in Advanced Micro Devices (AMD), the world’s second-largest microprocessor manufacturer; and a 35 percent stake in Piaggio Aero, an Italian manufacturer of turboprop aircraft.65 In summer 2008, Mubadala made its biggest single investment when it bought up $3.3 billion of shares of General Electric.66 This has made Muhammad’s corporation one of the top-ten shareholders in one of the oldest U.S. firms. Further diversifying its portfolio, in late 2008 Mubadala moved fast to acquire a $165 million stake in Finnish wind-turbine manufacturer WinWinD67 and a 25 percent, $50 million, stake in the ailing U.S. property company John Buck.68 Soon it will boost its stake in AMD to 20 percent at an additional cost of some $310 million over the original investment.69

Although dwarfed by the big-four investment vehicles, numerous other sovereign wealth funds are being operated by Abu Dhabi parastatals. Much like IPIC, the above-mentioned Abu Dhabi National Energy Company (Taqa) has a range of overseas energy and petrochemicals investments. Most recently, it has acquired a 50 percent stake in a subsidiary of the French renewable-energy company Theolia in an effort to develop Moroccan wind farms.70 Under the chairmanship of Hamad bin Muhammad Al-Hurr Al-Suweidi, it has built up about $9 billion in assets since its establishment in 2005,71 although some reports place its assets much higher.72 Although a publicly listed company, the government maintains control through a 51 percent stake, courtesy of the Abu Dhabi Water and Electricity Authority (ADWEA), which in turn is chaired by Sheikh Diab bin Zayed Al Nahyan.73 Other, smaller funds include those operated by the Abu Dhabi National Exhibitions Company (ADNEC), which recently purchased the Excel Building in London for $600 mil-lion,74 and Al-Mibar International, which has announced a $600 million joint venture with a Libyan company to develop real-estate and tourism projects in Libya. This has been followed up with investments in farmland and agricultural businesses in Kazakhstan, Pakistan and the Sudan.75 Little is known of Al-Mibar, but it may fall under the umbrella of the Mansurchaired Abu Dhabi Fund for Development (ADFD), Abu Dhabi’s primary dispenser of foreign aid, thus giving Mansur a second means of access to major overseas investments alongside the IPIC.

These formal sovereign-wealth entities have very recently been joined by a number of consortia, often made up of leading Abu Dhabi businessmen and members of the ruling family. In some cases, these groups have made direct investments independently of the parastatals, most notably the 2008 purchase by the Abu Dhabi United Group for Development and Investment of Britain’s Manchester City football club for about $360 million.76 Among this group’s members are Sheikh Mansur bin Zayed Al Nahyan and Sulayman Al-Fahim, the CEO of Hydra Properties. In another high profile case, the ubiquitous Mansur has even acted as an individual, investing some $5.2 billion in November 2008 to gain a 16 percent stake in Britain’s Bar-clays Bank.77 Although not strictly speaking a sovereign-wealth investment, the deal should nonetheless be classed as such, given his status as a senior member of the ruling family.

THE NEW ECONOMY

Notwithstanding the enormity of Abu Dhabi’s oil reserves and its overseas investments, for some time there has been recognition of the need to diversify the economy or, more specifically, to make an effort to launch genuinely non-oil-related sectors alongside the existing energy-reliant petrochemical industries. Thus far, Abu Dhabi’s diversification has lacked the pace and, as most impartial observers would concur, the desperation evident in resource-scarce Dubai, where oil production began to decline as early as 1991.78 However, an increasing concern over domestic employment prospects, unhealthy trade balances and inflationary pressures has undoubtedly made the “new economy” a development priority.

The complex issue of employment for Abu Dhabi’s growing population of educated young nationals has been discussed at length elsewhere.79 Nevertheless, it can be stated quite simply that the present makeup of the emirate’s economy is not well suited to the population’s future needs. Only a limited number of jobs requiring a narrow range of skills is ever likely to be available in government departments, oil companies or investment vehicles; and those nationals with alternative aspirations, abilities and qualifications will remain frustrated. Moreover, since 2003, it is thought that over $350 billion of Abu Dhabi’s total non-oil trade of about $500 billion has been made up of consumer imports. Most of these have been cars and electronics purchased from Japan, Germany, the United States and Italy. Another $140 billion of total trade has been made up of re-exports (mostly destined for Iran and India);80 only the tiny remainder has been genuine exports (mostly destined for Saudi Arabia and India).81 Thus, imports have exceeded exports by about fiftyfold, as the emirate has never had a strong non-oil manufacturing base. Closely connected to this problem, with little domestic economic activity and few domestic investment opportunities, the oil economy has increasingly burdened Abu Dhabi with excess liquidity. Although reliable data is rarely available, there is no doubt that the UAE has been suffering from very high levels of inflation for the past five or six years. This has been exacerbated by an inability to increase interest rates, as the UAE, along with other Gulf states, has historically pegged its currency to the U.S. dollar, with one dollar having been worth about 3.67 dirhams since 1997.82 In 2008, the Central Bank estimated that the UAE money supply was growing at its fastest ever rate (by about $50 billion per annum) and that inflation was at 11.1 percent.83 This prompted one informed observer to comment that “…the need for opening new investment outlets is dire in order to control inflation and maintain economic growth earnings.”84 In reality, the rate of inflation is much higher in Abu Dhabi than elsewhere in the UAE, given that it is the emirate in which liquidity has most dramatically outstripped investment opportunities. Food prices have been rising by between 15-20 percent per annum, and accommodation costs are undoubtedly hyperinflationary, aggravated by an increasing expatriate population and a shortage of housing stock in the capital. Despite a rent-rise cap of 7 percent that was introduced in late 2006,85 well-appointed two-bedroom city-center apartments can no longer be acquired for less than $50,000 a year, compared to just $16,000 five years ago.

The reformers, epitomized by Sheikh Muhammad bin Zayed Al Nahyan, wished to diversify Abu Dhabi’s economy in the late 1990s in the real-estate and tourism sectors, which are vulnerable to downswings and likely to decline in the event of nearby wars, terrorist attacks or the emergence of more attractive alternative destinations; however, these activities will add vibrancy to Abu Dhabi’s economy. They are by no means intended to be the bedrock wake of nearby developments in other economies such as Dubai, Bahrain and Qatar. In late 2004, following the death of his esteemed father and ruler of Abu Dhabi, Sheikh Zayed, an arrangement was made of the emirate’s diversification or barometers of its success, as seems dangerously the case in Dubai. Indeed, the tourism industry alone may now account for 17 percent of Dubai’s GDP.86 Moreover, as detailed below, that saw Muhammad installed as the new crown prince under the new ruler, his elder brother, Sheikh Khalifa bin Zayed Al-Nahyan. More important, Muhammad was given almost supreme executive powers over Abu Dhabi’s domestic affairs. Spearheaded by a new Executive Affairs Authority and his flagship Mubadala Development Corporation, which even set up a new operations department alongside its existing investment management group, Muhammad inspired Abu Dhabi’s captains of industry to begin focusing on the emirate’s domestic economic development.

Many of the new sectors prioritized by Mubadala and the other Abu Dhabi developers have been identified for long-term sustainable growth, and the consensus is that they are well placed to withstand the global recession, regional instability and other vagaries of the international system. There may be some new foreigner-focused Abu Dhabi has been more cautious with the location and nature of these activities than some of its neighbors. This should keep to a minimum the political and social costs of potentially incompatible populations, whether residential or expatriate tourist.

Equally commendably, Abu Dhabi’s new economic sectors, and all of the new buildings, plants and facilities that they will require, are being incorporated into an all-encompassing emirate-wide master plan. Mindful of the disorganization that has resulted from rapidly diversifying economies elsewhere in the Gulf, where government-sponsored plans have often been introduced too late to have any real impact, Abu Dhabi has been quick to introduce its “Plan Abu Dhabi 2030.” With long-term objectives and considerations, the plan breaks the mold of the usual short-and medium-term plans extant elsewhere in the UAE, most notably the Dubai Strategic Plan (which only extends up to 2015).87 Drafted by the Muhammad-chaired Abu Dhabi Urban Planning Council, the plan will see the new economy expand into carefully earmarked areas of the emirate and will ensure that the necessary infrastructure is in place first. Already Plan Abu Dhabi 2030 has initiated infrastructure projects costing in excess of $400 billion, and $175 billion of these should be complete by 2012.88 By 2015, there will be a network of tram lines in place, and by 2020 there will be a metro system and a regional train service. In contrast, Dubai’s diversification began without a plan: the city regularly grinds to a halt with traffic congestion, a mass-transit system is still not finished, power outages are not infrequent, and luxury residential neighbourhoods have been built adjacent to major industrial zones and other high-air-andnoise-pollution areas. Crucially, the global recession is unlikely to slow down Abu Dhabi’s 2030 ambitions, with government officials having already hinted that Abu Dhabi’s sovereign wealth funds and oil revenues could be drawn upon should conditions deteriorate much further. Indeed, one spokesman claimed, “The reserves are available. I’m not saying we will dip into them, but if we need them they are there. The government will always intervene if delays to the project will affect the credibility and sustainability of business in Abu Dhabi.”89

HIGH-TECH HEAVY INDUSTRIES

The centerpiece of Abu Dhabi’s new economy has been a select range of high-technology heavy industries. In most cases, these have involved the setting up of specialized subsidiary companies within the Mubadala Development Corporation or other big parastatals. The new companies have then been turned into joint ventures as international partners have been brought on board. The latter provide the technology, the market contacts and credibility while the parastatals provide the capitalization and ensure easy access to the necessary skilled labor by offering high, tax-free salaries. Moreover, in some instances, the parastatals have then strengthened the ventures by making direct investments in the foreign companies. Thus, the sovereign-wealth component of the old economy has been reinvigorated and applied to the new economy. This is thought to have been a particularly persuasive method of recruiting reputable, yet beleaguered, Western companies. As such, Abu Dhabi is using its surplus revenue to leapfrog decades of research and development and propel itself into the first world. With little subtlety, Mubadala’s own media-relations department confirms the strategy, stating that “Mubadala is making capital-intensive long-term investments. By partnering with top companies, we are leveraging the required expertise to build businesses in Abu Dhabi that have a global reach. Mubadala is analyzing the latest international trends and technologies as well as importing knowledge and expertise. We are also providing the facilities needed to attract and develop talent to support the growth of the sector.”90

With little time lost since 2004, the sector has already had a major impact. For the first two quarters of 2008, it was estimated that the emirate’s non-oil exports had risen by over 50 percent, while imports had risen by only 25 percent.91 Non-oil contributions to the gross domestic product also seem to be rising: currently they are thought to stand at about 40 percent, predicted to rise to 50 percent by 2015 and 60 percent by 2025.92 One of the most prominent examples of this new high-technology manufacturing is Abu Dhabi’s aerospace industry.93 As Mubadala’s CEO has explained, “…you can only make a studied play in five or six different sectors that you can ultimately become internationally competitive in, and we believe aerospace happens to be one of them.’94 Out of the remnants of the Gulf Aircraft Maintenance Company, originally formed in 1977 and owned by Gulf Air, Mubadala has recently crafted a new subsidiary, Abu Dhabi Aircraft Technologies (ADAT).95 While maintenance remains at the core of its business strategy, in summer 2008 ADAT achieved a double victory: it was awarded a contract to manufacture wing parts and other components for the European Aeronautic Defence and Space Company’s (EADS) flagship A380 Superjumbo. Also, ADAT was approved by EADS as the only company in the Middle East permitted to service A380 engines.96

The former would not have been possible without Mubadala’s $500 million investment in an Abu Dhabi-based carbon-fiber plant, as this will provide ADAT with ready access to the materials it needs. The latter would not have been possible without technological input from Rolls Royce as part of a deal brokered by Mubadala earlier in 2008. In the near future, ADAT will also be supported by a new $8 billion high-technology joint venture in Abu Dhabi set up by Mubadala and General Electric,97 the above-mentioned recipient of a large Mubadala sovereign-wealth injection. Over the next five years, ADAT plans to increase its annual revenues to $1 billion, expanding its maintenance operations from existing Gulf customers such as Etihad Airways and Qatar Airways into the Indian market.98 By 2013, it hopes to win contracts to manufacture parts for EADS’ forthcoming A350. In the long term, ADAT intends to export its components to other buyers — Italy’s Finmeccanica has already signaled an interest — and it has even stated that it eventually intends to assemble entire aircraft in Abu Dhabi.99

In the near future, Abu Dhabi will move into the manufacture of computer microprocessors, with Mubadala’s stake in AMD having unsurprisingly led to a new joint venture in the emirate between AMD and another new Mubadala subsidiary, the Advanced Technology Investment Company (ATIC). The venture, tentatively named the Foundry, is now 66 percent owned by ATIC and will produce video cards, mobile phones and consumer electronics, in addition to processors.100 Other key examples of high-technology heavy industries include Abu Dhabi’s manufacturing and export of oil rigs. Since 2005, the Oilfield Drilling Equipment and Rig Company (ODERCO) has been selling rigs to other Gulf states and Singapore. Impressively, in 2008 it won a $135 million contract to supply rigs to a Texas-based oil company, beating heavy European competition.101 Shipbuilding has been identified as another priority area, with the Abu Dhabi Shipbuilding Company (ADSB) having recently begun manufacturing entire ships. Originally set up in 1996 by Sheikh Muhammad bin Zayed Al Nahyan for the purposes of repairing UAE navy and coastguard vessels, it is now 40 percent Mubadala-owned and holds a $1 billion contract to build six new Baynunah Class corvettes for the UAE navy.102 This has been made possible by a Mubadalaarranged joint venture with a British naval-defense company, BVT Surface Fleet,103 and with France’s Constructions Mécaniques de Normandie (CMN).104 ADSB has already manufactured several naval landing crafts, some of which have been sold to the Royal Navy of Oman.105 It is thought that the ADSB has also teamed up with another French manufacturer to build some small amphibious craft and mini-submarines, although these may be far from completion.106 The new shipping industry will be complemented by the manufacture of integrated naval defense systems by Abu Dhabi Systems Integration (ADSI), a joint venture between ADSB and Selex Sistemi Integrati, which in turn is a division of the aforementioned Finmeccanica.107

Further connecting Abu Dhabi’s new industries to the military and thereby fulfilling two purposes — economic diversification and improved security — has been a spate of joint ventures with Western arms and security-equipment manufacturers. These include a three-way partnership between Emirates Advanced Investments, Raytheon and Lockheed Martin to produce Javelin portable anti-tank missiles. Significantly, these will be sold to both the UAE military and international customers.108 Other projects include the joint manufacture with European companies of military motorcycles, jeeps and reconnaissance aircraft.109 Further examples include Biodentity, an Abu Dhabi-based company set up by the Abu Dhabi Investment Company and Canada’s Cryptometrics after the latter reportedly received an investment from ADIC. Biodentity will manufacture biometric face-scan systems that will be sold to Abu Dhabi International Airport and other airports in the region.110 Most recently, and on a much larger scale, Mubadala has set up a $1.2 billion subsidiary, Al-Yah Satellites, that will build military and commercial satellites. Its technology partner is Astrium, a division of EADS. The pair intends to launch the satellites from Kazakhstan and sell them to the UAE military and other customers in southern Europe, Africa and Southeast Asia.111

FUTURE ENERGY INDUSTRIES

Alongside the aerospace industry, various military manufacturers and other areas of non-oil diversification, there has also been an effort to build up “future energy” and other green industries. As one spokesman112 has explained: “Abu Dhabi knows the energy business rather well. It also enjoys competitive advantages allowing it to successfully establish these new industries, while simultaneously diversifying its economy and providing high-quality job opportunities.”113 Moreover, despite the irony of Abu Dhabi’s being one of the largest hydrocarbon exporters, support for nature and improving the environment have historically been key legitimacy resources for the emirate’s rulers. Also, there has long been a concern over the environmental impact of Abu Dhabi’s rapid economic development. The World Wildlife Fund recently announced that the UAE has the worst carbon footprint in the world, over five times greater than the global average and some six times greater than the carrying capacity of the earth’s biosphere.114 In Abu Dhabi specifically, waste per capita has been estimated at over 2.3 kg per day, most of it dumped into pits in the desert.115 This is much more than the 1.5 kg average for the countries of the Organization for Economic Cooperation and Development (OECD).116 Therefore, the launching of this new sector is actually serving three purposes: economic, political and environmental.

In 2006, the Mubadala Development Corporation established yet another subsidiary to pioneer these developments, the Abu Dhabi Future Energy Company (ADFEC). The plan was for $4 billion of the new company’s budget to come directly from Mubadala, while the remainder of its anticipated $22 billion budget would be drawn from international partners through joint ventures, thereby making the entity an excellent (and wholesome) foreign-direct-investment vehicle. ADFEC’s first major project has been Masdar City, a large carbon-neutral development inAbu Dhabi’s hinterland. Sheikh Muhammad bin Zayed Al Nahyan laid the virtual cornerstone in 2008 on Masdar’s website,117 and the project is expected to reach completion in 2016.118 The aim is for ADFEC to provide the infrastructure for a “free zone” that will allow up to 1,500 renewable-energy and other environment-related international companies to base themselves in Masdar or at least have their regional headquarters there. Some of these will be focused on carbon-capture technologies; it is expected that they will export their services to nearby countries still relying on outdated hydrocarbon-extraction technologies. For every ton of captured carbon, the Masdar-based company will receive 12 euros as per the carbon-credit market established by the Kyoto Protocol; this will help to offset the rent they will pay to ADFEC.119 Moreover, ADFEC itself is hoping to benefit directly from carbon-credit schemes should the UN-proposed Clean Development Mechanism be introduced. This system will provide remuneration for those companies that store captured carbon gas underground. ADFEC plans to pipe captured gas from existing power plants in Abu Dhabi to disused underground oil wells in the desert. 120

ADFEC is also hoping to attract research-and-development-focused companies to Masdar in an effort to make Abu Dhabi the region’s capital for green technologies. As another result of the Mubadala General Electric agreements, one of these will be joint venture that will also involve investments from Siemens and Credit Suisse. This company will employ more than a hundred experts and manage a $50 million “clean technology fund.”121 Similarly, Mubadala’s described investment in WinWinD is likely to lead to a wind-power joint venture in Masdar.122 In support of all these companies will be a new research center, the Masdar Institute. It appears that the Massachusetts Institute of Technology, Imperial College London, the Tokyo Institute of Technology, Columbia University, and the German Aerospace Centre have all agreed to assist this center.123

In the near future, ADFEC will build a number of non-hydrocarbon power plants in Abu Dhabi. The first of these, a $350 million solar plant in cooperation with the German Aerospace Center, should be completed by 2009.124 The next big step will be nuclear energy, with the company having announced plans to construct three nuclear power plants at a cost of $7 billion each. Two will be on Abu Dhabi’s coastline, most probably in the western region, while the third is likely to be in Fujairah. Together, it is expected these plants will meet 30 percent of Abu Dhabi’s energy needs by 2012 and perhaps all of the energy needs of partner emirates such as Fujairah. As with Masdar, a range of foreign expertise will be brought on board. Cooperation agreements have already been signed with French and U.S. nuclear companies,125 and, given the enormous expense and sensitivity of the project, there will probably be some element of sovereign-wealth “sweetening” involved. The plan at present would seem to be that the uranium required by these plants will not be enriched in Abu Dhabi but will come from a proposed international “nuclear bank” that will cost $150 million to set up. Orchestrated by the Nuclear Threat Initiative, a non-governmental organization, the bank’s financial backers already include Warren Buffet and the government of Norway and the United States. Unsurprisingly, in 2008 the federal minister for foreign affairs, Sheikh Abdullah bin Zayed Al Nahyan, pledged that the UAE would also make a sizable contribution.126

EXCLUSIVE REAL ESTATE

The issue of foreign ownership of real estate is highly sensitive. Since their respective dates of independence, the Gulf states have all prohibited foreign ownership for non-Gulf nationals by law, on the grounds that certain activities, most notably landlordship, were to be exclusively for nationals. In recent years, certain parts of the Gulf, led by Dubai since 1997, have relaxed their rules, at first permitting long leaseholds for non-Gulf nationals and then granting freeholds. In the summer of 2005, Abu Dhabi finally followed suit, allowing renewable 99-year leases for foreigners.127 Although the sector is far from being a central component of Abu Dhabi’s new economy, it is nevertheless viewed as an additional stream of domestic investment and employment opportunities for Abu Dhabi nationals, a useful foreign-direct-investment tool and a means of improving the emirate’s international reputation and visibility.

Abu Dhabi’s new real-estate sector cannot easily be compared with the developments in its neighbors, in part because the motivations behind its creation are very different. There is no desperation to bring in foreign money. Almost all of the emirate’s real-estate projects are at the very highest end of the market. Despite being an immature industry, its prices are far higher on average than those in Dubai, Qatar, Ajman, Ras al-Khaimah and other areas. There are no middle or low-end developments, and none seem to be planned. Moreover, all the major real-estate projects, as per Plan Abu Dhabi 2030, have been carefully corralled into specified areas of the city. Keen to avoid embarrassing overlaps of non-Muslim residents with more conservative Abu Dhabi nationals and other Gulf Arabs, most of the emirate’s “Dubai-style” properties — complete with bars and nightclubs — will be situated on Reem, a large island off the main island’s eastern coast, whereas most of the properties targeted at Gulf Arabs (and in some cases restricted to Gulf Arabs) are being built either on the main island or on the hinterland approaches to Abu Dhabi. Also, it is notable that the authorities have been keen to market Abu Dhabi real estate in a more discreet fashion. Rarely will one see large advertisements featuring alcohol-imbibing Western or Levantine women in revealing attire, as is often the case in Dubai, but rather scenes depicting family life, perhaps with small children and modestly dressed women. Furthermore, for those projects clearly targeting Gulf Arabs, the advertisements invariably stress the “community facilities,” namely mosques, that will be available. Abu Dhabi does not want a repeat of Dubai Marina, where many of the community’s Muslim residents are appalled to find no mosque on the entire 150,000- inhabitant development.128

Abu Dhabi also needs to avoid an oversupply of property and the inevitable price correction that is taking place in the other nascent real-estate sectors elsewhere in the Gulf. Although many property developers are operating in Abu Dhabi, some of which have even brought on board foreign backers129 or offered securitized sharia-compliant Islamic bonds (sukuk) to raise capital,130 only a few master developers control the main zones and are responsible for the necessary real-estate infrastructure. These master developers are all either majority-owned by parastatals or have such close ties to key members of the ruling family that they are effectively under the government’s control. In contrast, only 50 percent of Dubai’s real-estate stock is controlled by government entities, and it is predicted that Dubai will soon have as many property units reaching completion as Shanghai, a city with 13 times its population. The scale of this impending glut, and the government’s inability to scale it back, led market analysts and ratings agencies to predict in summer 2008 that “…the magnitude of price corrections [in Dubai], should they occur, could be substantial.”131 When the global downswing finally reached Dubai’s shores in October 2008, prices plummeted and the value of most Dubai properties has continued to fall drastically, with several planned developments being suspended and employees at major developers being made redundant.132 Significantly, although Abu Dhabi expects to deliver 160,000 units by 2010133 and has real-estate projects totaling over $20 billion underway,134 this is a mere trickle compared to its close neighbor. In early 2008, Abu Dhabi house prices increased at double the rate in the rest of the Gulf,135 and by the end of 2008, they appeared to be holding up much better than elsewhere in the region.

Aldar Properties was the first of Abu Dhabi’s new real-estate companies, and its pioneering role can be compared to that of Dubai’s Emaar Properties. With the Mubadala Development Corporation and the Abu Dhabi Investment Company as its two major shareholders (each with 17 percent stakes),136 and with the managing directors of both Mubadala and the International Petroleum Investment Company sitting on its board,137 Aldar is synonymous with the establishment and probably accounts for over $4 billion of the sector total.138 Thus far, it has specialized in developments aimed at Abu Dhabi nationals and other Gulf Arabs. Its first project, Raha Beach, is now close to completion, and most apartments and villas have sold for $800 per square foot.139 Its other developments include Al-Gurm Resort, a collection of luxury chalets close to the emirate’s mangrove swamps, and Coconut Island, which will consist of villas exclusively for Gulf nationals. Aldar has also ripped out the city’s fire-damaged old souq and is building the enormous Central Market. This multistory complex straddling Khalifa Street will feature a shopping mall topped by luxury apartments.

The Reem Island developments are being master planned by three companies: Tamouh, Al-Reem Investments and Sorouh. Together, they have divided the island into different zones. Tamouh’s 60 percent share consists of the City of Lights and Marina Square; Al-Reem is building Najmat village; and Sorouh is building the Al-Shams and Saraya resorts. The largest of the three, Tamouh, is owned by the Royal Group, which in turn is owned by Sheikh Tahnun bin Zayed Al Nahyan, a younger full brother of the crown prince. Tahnun is also chairman of Al-Reem, and although Sorouh has a large number of shareholders, it is nevertheless believed to be under the patronage of the ruler’s two sons, Sheikh Sultan and Sheikh Muhammad. Further developments on Reem by smaller companies, which should bring the island’s population up to 200,000 upon completion,140 will include Plus Properties’ Skygardens project and Hydra Properties’ Hydra-Trump Tower. As for the latter, when asked why the tower would not simply be named after Donald Trump, as has been the case with Dubai’s Trump Tower, Hydra’s CEO — the aforementioned Sulayman Al-Fahim — insisted that Hydra’s name needed to be alongside Trump “because Hydra is not less than Trump.”141 Indeed, Al-Fahim hosts the UAE version of Donald Trump’s “Apprentice” television show, “Hydra Executives.” He has even coined his own Trump-like catchphrase, “Impress me.”

Blessed with several small islands close to the main island, Abu Dhabi has had no need to resort to costly land reclamation (although some does take place). Over the next few years these, too, will be developed. Mubadala will focus on Sowwah Island, where it intends to build both commercial and residential real estate and a new headquarters for the Abu Dhabi Securities Exchange.142 Most of the development will be undertaken by John Buck International, a joint venture born out of Mubadala’s above-mentioned investment in the eponymous U.S. property firm.143 Most ambitiously, on nearby Nurai Island, a new company, Zaya, will initiate a $1 billion project comprising only villas. Each will retail for over $25 million and will only be reachable by private yacht or helicopter. Soon, even the giant 1,000acre manmade Lulu Island, which since its completion in 1992 has stood undeveloped off the Abu Dhabi corniche, will be built upon, with Sorouh recently having its master plan approved.144

LUXURY AND CULTURAL TOURISM

Although again secondary to the main thrust of Abu Dhabi’s new economy, the emirate’s tourism industry is rapidly expanding. Today, a modest 10,000 hotel rooms are available, but that number is expected to rise to 25,000 by 2012, and to 75,000 by 2030. As in the real-estate sector, much of the industry will be in the hands of a few major developers, with Aldar alone planning to construct over 40 of Abu Dhabi’s new hotels.145 Moreover, Abu Dhabi is again aiming at the highest end of the market, perhaps in an effort to ensure more culturally compatible visitors to the emirate. In summer 2008, the capital’s flagship hotel, the Emirates Palace, submitted itself to the Guinness Book of Records for offering the most expensive holiday package deal in history: $1 million for seven nights.146 Among the biggest projects already underway are a 200-room “ecotourist” hotel and marina being built in the mangrove swamps, and a $3 billion, 600room, MGM Grand Hotel being constructed in association with Las Vegas’ MGM Mirage group.147 Most of these new hotels will be clustered in specific areas, thereby keeping potentially unpalatable community overlaps to a minimum. Segregation will increase dramatically, with even public beaches charging fees for unaccompanied men and the designation of exclusive areas for families and more obvious tourists.148 Abu Dhabi clearly does not relish a repeat of Dubai’s sex scandal of summer 2008, which resulted in the arrest of two British nationals for alleged indecent conduct on a public stretch of Jumeirah beach.149

The big parastatals are supporting the sector by planning a wide range of cultural tourism activities. These should help position the emirate as a distinct alternative to the more mid-market sun-and-shopping tourist trade of Dubai and other Gulf states. Much of the emirate’s strategy has been developed by the Office of the Brand of Abu Dhabi (OBAD), which falls under the umbrella of the Abu Dhabi Tourism Authority (ADTA). The latter tends to hire well-known publicity firms in the five or so countries where it has branch offices, and these in turn place advertisements in highbrow publications.150 Soon, ADTA expects to have ten additional overseas offices, and it is likely these will adopt the same tactic. The Mubadala Development Corporation is, naturally, also heavily involved. A Mubadala subsidiary,151 the Tourism Development Investment Company (TDIC), has already organized several high-profile exhibitions at the Emirates Palace. One such event, a Picasso exhibition, was thought to have brought 40,000 visitors to the capital.

Most famously, at a total cost of over $27 billion, TDIC is developing Saadiyat “island of happiness” into Abu Dhabi’s major cultural hub. Linked by ten bridges to the main island, by 2012 Saadiyat will be home to branches of the Louvre and Guggenheim museums in addition to a new Sheikh Zayed National Museum, a performing arts centre, a maritime museum and a 19-pavilion cultural park. The Louvre Abu Dhabi alone will cost $110 million to build, and TDIC has agreed to pay a further $520 million for the Louvre brand name and the loan of various exhibitions and collections. As a further incentive, it is thought that Abu Dhabi will finance a new art-research center in Paris, pay for the restoration of Chateau Fontainebleau’s theatre — to be renamed after Sheikh Khalifa bin Zayed Al Nahyan — and provide $32 million to help the Louvre repair a wing of the Pavilion de Flore. When complete, the latter will host a new gallery of international art named after the late Sheikh Zayed bin Sultan Al Nahyan.152 The Guggenheim Abu Dhabi will be the sixth international branch of the renowned New York museum. To be designed by Frank Gehry, the new building will cover over 30,000 square meters and will become one of the world’s largest exhibition venues.153 Equally impressive, the building for the new national museum will be the result of an international architecture competition. It is likely to feature at least four different galleries focusing on Abu Dhabi’s heritage, its environment, Zayed’s leadership and the region’s economic transformation.154

Alongside culture and the arts, the sector will also be boosted by a series of high-profile sporting events and world-class leisure facilities. Building upon ADTA’s staging of the world’s first Formula One festival in 2007,155 in something of a coup for Abu Dhabi the emirate will begin hosting the championship-decider Formula One Grand Prix in 2009. Aldar is constructing a circuit on Yas Island with facilities to host over 100,000 spectators. Elsewhere on the island, planning is underway for other motor-racing and sports-related developments totaling $40 billion, including hotels, restaurants, golf courses and a giant Ferrari theme park.156 Building upon its acquisition of a stake in the Italian company, Mubadala has effectively made Ferrari Abu Dhabi’s “home team.” It has cemented the relationship further by signing a three-year sponsorship agreement that will see Ferrari F1 cars featuring the Mubadala logo prominently on their nose cones.157 Bizarrely, skiing will also become possible in Abu Dhabi, with Tamouh building a giant indoor ski slope on Jebel Hafit, the UAE’s second-highest mountain. Tamouh promises this development will be aimed at both leisure seekers and professionals, therefore escaping the criticisms of gimmickry that are often leveled at Dubai’s indoor slope at the Mall of the Emirates.158 Music, too, features prominently in Abu Dhabi’s tourism strategy. Mubadala has already staged concerts by Bon Jovi, Justin Timberlake and Christina Aguilera at the Emirates Palace and has promised several further high-profile acts within the next few years. It is thought that negotiations are in an advanced stage with leading opera and theatre companies as well.

Also in support of tourism, and indeed all of Abu Dhabi’s new sectors, especially the new aerospace industry, has been the highly successful launch of a new international airline. Having withdrawn in 2003 from the unprofitable Gulf Air partnership with Bahrain, Qatar and Oman, Abu Dhabi unilaterally set up Etihad Airways.159 Rather daringly, the new airline, chaired by Sheikh Ahmad bin Saif Al Nahyan, immediately declared itself to be the “official national carrier of the UAE,” despite Dubai’s award-winning Emirates Airline being in its eighteenth year of operation. Nevertheless, Etihad has been able to prove itself very quickly, and over the last few years Ahmad has purchased several billion dollars worth of aircraft.160 While Emirates undoubtedly stole most of the headlines in 2008 by taking receipt of its first A380s, Etihad was quietly placing a $43 billion order for over 200 new aircraft, including a mixture of A380s and Boeing 787 Dreamliners.161 As the largest single order in civil aviation history, this will soon transform Etihad into one of the world’s largest carriers, thereby making its growth trajectory even more impressive than that of Emirates and its other principal rival, Qatar Airways. Underpinning Etihad’s phenomenal expansion, the Abu Dhabi government has also committed to a massive upgrade of air infrastructure, with the new Abu Dhabi Airports Company (ADAC) spearheading the redevelopment of Abu Dhabi International Airport at a cost of $6.8 billion. By 2012, two new terminals will have been added, expanding the airport’s annual capacity from about 7 million to over 20 million passengers, most of whom will be tourists and transit passengers. Elsewhere in the emirate, ADAC will also expand the old Al-Ayn airport and redevelop the former military airport in Bateen to become “City Airport,” the first dedicated airport for private jets in the Middle East.162

CONCLUSION

With its substantial remaining oil reserves and with plans to increase oil output even further, Abu Dhabi will have the resources and surpluses it needs — regardless of the current economic downswing — to extend considerably its historic strategy of building up petrodollar-financed overseas investments. With acquisitions across Asia, Africa, and increasingly in Western Europe and North America, the emirate’s plethora of government-backed investment vehicles are already in control of funds several times greater than those of other prominent asset-managing states.

Moreover, a multi-dimensional domes-tic economy is being built up to provide employment and investment opportunities for both citizens and an expanding population of skilled expatriates. In an unhurried, measured fashion, Abu Dhabi has been able to introduce more carefully than its neighbors a variety of non-oil activities including high-technology heavy industries, renewable energies, a luxury real-estate market and cultural tourism. With astute management and strong government backing, these should all be able to weather the looming global recession and morph steadily over the next decade into one of the most impressively innovative economies in the Arab world.

 

1 Dubai’s share is now only 4 percent, with the remainder made up of minimal exports from Sharjah, Ras al-Khaimah and Fujairah. Ajman and Um al Qawain do not have commercially exploitable oil reserves. See U.S. Energy Information Administration, The United Arab Emirates: Country Analysis Brief (2007).

2 Oxford Business Group (OBG), Abu Dhabi: The Report 2007.

3 UAE Central Bank estimates, 2008.

4 The ZADCO concession will last until 2026; the ADMA until 2018; the ADCO until 2014.

5 Christopher M. Davidson, The United Arab Emirates: A Study in Survival (Lynne Rienner, 2005), pp. 94-95.

6 OBG, Abu Dhabi: The Report 2007.

 7 In 1999, ADNOC revenues were estimated at $13 billion, increasing to $56 billion in 2006. See Jean-François Seznec, “The Gulf Sovereign Wealth Funds: Myths and Reality,” Middle East Policy, Vol.15, No. 2, 2008, p. 99.

8 Financial Times, December 17, 2008, quoting National Bank of Abu Dhabi reports.

9 The National, July 24, 2008; ADGAS statistics 2007.

10 OBG, Abu Dhabi: The Report 2007, p. 151; Davidson, pp. 94-95.

11 OBG, Abu Dhabi: The Report 2007, p. 151.

12 The National, July 24, 2008; personal interviews, Abu Dhabi, April 2008.

13 Financial Times, July 8, 2008.

14 ADGAS statistics, 2007.

15 OBG, Abu Dhabi: The Report 2007, p. 152.

16 The remainder being oil and liquid fuelled. Gulf News, July 31, 2008.

17 The National, July 24, 2008.

18 Economist Intelligence Unit 2000; OBG, United Arab Emirates: The Report 2000, pp. 54-55. The second phase of the project will involve an underwater pipeline from Oman to Pakistan.

19 OBG, Abu Dhabi: The Report 2007.

20 The Kish and Henjam offshore fields will soon be exploited. Tehran Times, January 2, 2008.

21 AME Info, May 21, 2008.

22 The National, April 5, 2008.

23 Personal interviews, Abu Dhabi, April 2008.

24 OBG, Abu Dhabi: The Report 2007, p. 202.

25 Ibid. p. 202; OBG, United Arab Emirates: The Report 2000, pp. 94-95.

26 OBG, Abu Dhabi: The Report 2007, p. 212.

27 The latter being built at Ruwais in cooperation with Rio Tinto. The National, July 24, 2008; Seznec, p. 101.

28 Borealis press release, March 19, 2008.

29 Arabian Business, August 29, 2008.

30 OBG, Abu Dhabi: The Report 2007, p. 203.

31 Ibid, p. 204.

32 Gulf Today, July 18, 2007; personal interviews, Abu Dhabi, August 2007.

33 OBG, Abu Dhabi: The Report 2007, p. 214.

34 Personal interviews, London, May 2007; Euromoney, April 1, 2006.

35 The Government of Singapore Investment Corporation is the largest; See The Economist, January 17, 2008.

36 Norges Bank press release, May 2008. The largest Norwegian fund is the Government Pension Fund of Norway.

37 Notably the Kuwait Investment Authority; see Reuters, June 20, 2008.

38 Dubai World is thought to control $90-100 billion in funds; personal interviews, Dubai, August 2008.

39 Notably the Qatar Investment Authority. See The New York Times, December 11, 2007.

40 Hendrik Van der Meulen, “The Role of Tribal and Kinship Ties in the Politics of the United Arab Emirates” (Ph.D. thesis, Fletcher School of Law and Diplomacy, 1997), p. 93.

41 Personal interviews, Dubai, January 2007.

42 ADIA is based in the new Samsung building on the Corniche, which was completed in 2006 and has now eclipsed the Hilton Hotel’s Baynunah Tower to become the tallest building in Abu Dhabi.

43 The Economist, January 17, 2008; Seznec, pp. 97, 101. ADIA is believed to have $875 billion, according to Deutsche Bank. Seznec believes the figure to be much lower, but he may have placed insufficient weight on ADIA’s history of investments in emerging markets.

44 It was reported in January 2009 that ADIA had lost about $125 billion; see Bloomberg, January 15, 2009.

45 The Abu Dhabi Investment Council was set up according to Abu Dhabi Law 16 of 2006.

46 Jean-Paul Villain joined ADIA in the early 1980s from Paribas; The New York Times, February 28, 2008.

47 Personal interviews, London, May 2008; The New York Times, November 27, 2007.

48 Personal correspondence, August 2008.

49 Said bin Mubarak Rashid Al-Hajiri.

50 The New York Times, February 28, 2008; personal interviews, London, May 2008; OBG Abu Dhabi: The Report 2007, p. 43.

51 Seznec, p. 100; personal correspondence, August 2008. Seznec puts ADIC at $7 billion.

52 Khalifa bin Muhammad Al-Kindi is chair of ADIC, while Nasser bin Hamad Al-Suwaidi is deputy chair.

53 Al-Bawaba, July 13, 2008.

54 Agence France Presse, July 9, 2008.

55 The National, July 28, 2008.

56 Personal interviews, London, May 2008.

57 Seznec, p. 101.

58 Ibid, p. 101; The National, August 5, 2008.

59 Zawya Dow Jones, September 18, 2007.

60 The National, July 21, 2008.

61 The National, September 11, 2008.

62 Mubadala holds 51 percent of Dolphin; Total and Occidental each hold 24.5 percent. OBG, Abu Dhabi: The Report 2007, p. 128.

63 Seznec, p. 100.

64 Ibid, p. 100.

65 Ibid, pp. 100-101; Mubadala press release, December 2007; AMD press release, November 16, 2007.

66 The National, July 22, 2008.

67 AMEInfo, September 23, 2008. The purchase of this stake was reported as being carried out by Masdar, a subsidiary of Mubadala.

68 The National, December 4, 2008.

69 The National, December 9, 2008.

70 Gulf News, June 15, 2008. The subsidiary is the Campagnie Eolienne du Detroit (CED).

71 Seznec, p. 101; personal interviews, Abu Dhabi, April 2008.

72 Gulf News in June 2008 reported its assets at $23 billion.

73 ADWEA information department, 2008.

74 Personal interviews, London, June 2008.

75 The National, May 20, 2008.

76 International Herald Tribune, September 2, 2008.

77 Reuters, October 31, 2008.

78 By 1995, production had dropped to around 300,000 barrels per day. See Christopher M. Davidson, Dubai: <The Vulnerability of Success (Hurst, 2008), p. 101.

79 Christopher M. Davidson, “Abu Dhabi: Labour Nationalization,” Länderprofile: Edition Golfstaaten, December 2008, pp. 28-29.

80 The National, July 26, 2008.

81 The National, July 18, 2008; personal interviews, Abu Dhabi, April 2008.

82 OBG, Abu Dhabi: The Report 2007, p. 38.

83 Gulf News, July 13, 2008.

84 Ahmad bin Muhammad Al-Samerai.

85 OBG, Abu Dhabi: The Report 2007, p. 54.

86 OBG, Dubai: The Report 2007, authors’ estimates.

87 An exception is Oman’s “Oman Vision 2020.”

88 Middle East Economic Digest, June 6, 2008.

89 Financial Times, December 17, 2008, quoting Hussein Nowais, chairman of Abu Dhabi Basic Industries.

90 Mubadala Development Corporation press release, July 2008, with reference to the aerospace industry.

91 The National, July 26, 2008, quoting the Abu Dhabi Department for Planning and the Economy.

92 Khaleej Times, May 11, 2008.

93 Middle East Economic Digest, June 6, 2008.

94 The National, July 12, 2008.

95 Ibid.; personal interviews, Abu Dhabi, April 2008.

96 The National, July 22, 2008.

97 Ibid.

98 The National, July 12, 2008; personal interviews, Abu Dhabi, April 2008.

99 The National, July 31, 2008.

100 The National, December 9, 2008.

101 Gulf News, August 3, 2008; Trade Arabia, August 4, 2008.

102 OBG, Abu Dhabi: The Report 2007, p. 203. The Baynunah Class corvettes are 70m “multi-mission” naval corvettes. See AMEInfo, January 8, 2007.

103 The National, July 20, 2008; Gulf News, August 2, 2008.

104 CNM press release, December 21, 2008.

105 AMEInfo, January 8, 2007.

106 Personal interviews, London, May 2008.

107 The National, July 20, 2008.

108 The National, July 30, 2008; personal interviews, Abu Dhabi, April 2008.

109 It is thought that the light aircraft will be called Mako and that the jeeps are some sort of stealth jeep. See Davidson 2008, p. 266.

110 Gulf News, July 20, 2008; The National, July 14, 2008; The National, July 20, 2008.

111 Personal interviews, London, May 2008; to some extent corroborated by The National, August 6, 2008.

112 Sultan bin Ahmad Al-Jaber, CEO of ADFEC.

113 Arabian Business, December 8, 2007.

114 Personal correspondence with Mari Luomi, September 2008.

115 There are plans by the Environmental Agency Abu Dhabi to set up a center to treat hazardous garbage, and a new $200m recycling plant is being built at Al-Mafraq by Abu Dhabi Municipality.

116 The National, July 22, 2008.

117 See www.masdaruae.com.

118 Personal correspondence with Mari Luomi, September 2008.

119 The National, July 23, 2008.

120 The National, December 10, 2008.

121 The National, July 22, 2008.

122 AMEInfo, September 23, 2008.

123 Masdar City press release, July 2008.

124 Arabian Business, December 8, 2007.

125 Gulf News, July 31, 2008.

126 Gulf News, August 7, 2008.

127 Emirates News Agency (WAM), August 14, 2005.

128 At present there only appears to be a non-Muslim-specific prayer room above the Marina’s main supermarket.

129 In summer 2008, Al-Madina Finance, a Kuwaiti investment vehicle, invested nearly $1 billion in a multi- tower Reem Island project. See The National, July 20, 2008.

130 There has been a very high uptake, with Aldar having issued a 3.75 billion dirham bond and Sorouh having issued a four billion dirham bond. See The National, July 14, 2008.

131 Financial Times, July 9, 2008, quoting Fitch ratings agency.

132 Bloomberg, December 4, 2008; Daily Telegraph, November 21, 2008; Guardian, December 5, 2008; Financial Times, November 14, 2008.

133 Financial Times, July 15, 2008.

134 The National, July 18, 2008; Author’s estimates.

135 In summer 2008, it was reported that Abu Dhabi property-price increases had begun to outstrip Dubai’s. A real-estate report conducted by HSBC revealed that between late 2007, and mid 2008, Abu Dhabi property prices rose by 61 percent compared to 37 percent for Dubai. See Zawya Dow Jones, July 15, 2008.

136 The National, December 4, 2008.

137 Khaldun bin Khalifa Al-Mubarak and Khadem bin Abdullah Al-Qubaisi, respectively.

138 The National, July 29, 2008.

139 The National, July 23, 2008.

140 Personal interviews with Tamouh spokespersons, Abu Dhabi, April 2008.

141 The National, July 18, 2008.

142 AME Info, March 7, 2006.

143 The National, December 4, 2008.

144 AME Info, March 7, 2006.

145 Gulf Construction, Vol. 29, No. 8, 2008.

146 Gulf News, August 5, 2008.

147 The National, May 12, 2008.

148 The National, July 12, 2008.

149 Daily Mail, July 19, 2008.

150 The National, July 12, 2008.

151 The relationship between Mubadala and the TDIC is unclear, but it is widely understood that the TDIC is under Mubadala’s umbrella, with ADTA being its sole shareholder. There is some overlap in board membership, with Muhammad bin Saif Al-Mazrui serving on both the Mubadala and TDIC boards.

152 The New York Times, March 7, 2008; Financial Times, December 17, 2008.

153 Guardian, August 10, 2006.

154 AME Info, June 11, 2007.

155 BBC News, January 22, 2007.

156 Bloomberg, November 26, 2006.

157 Al-Bawaba, March 16, 2008.

158 Personal interviews, Abu Dhabi, April 2008.

159 Today, Gulf Air is effectively Bahrain’s national carrier and has predicted losses of over $1 billion over the next few years. See The National, August 4, 2008.

160 Daily Telegraph, July 21, 2004

161 The National, July 14, 2008.

162 ADAC press release, July 2008; Gulf News, November 15, 2008.