Abu Dhabi Review

Diversification in full flow< --top2-->

A new tiles factory built by the Jamal Al Ghurair Group 

Abu Dhabi is currently focusing on an economic diversification programme aimed at reducing its reliance on hydrocarbons.

As part of its diversification strategy, the government is making huge industrial investments in a bid to push forward with developments while oil revenues are high. The private sector’s involvement is also vital. Abu Dhabi has incorporated the Higher Corporation for Specialised Economic Zones or Zonescorp aimed at giving entrepreneurs and businesses something of a one-stop shop in terms of access to integrated infrastructure and communications facilities.
The emirate has also incorporated the General Holding Company (GHC), which is charged with creating, incubating and ultimately privatising new and strategically important industries. Its current portfolio includes construction materials, food-related manufacturing, energy services and leather goods. The third entity charged with industrial diversification and investment activities is the Mubadala Development Company, which has made over 25 international investments, acquisitions and public-private partnerships since its inception in 2002.
In terms of Abu Dhabi’s growing industrial segments, pharmaceuticals, though small, is burgeoning through projects such as NeoPharma’s plant in the industrial city of Mussafah. Ambitious aluminium projects are also underway and advanced feasibility studies are taking place concerning the production of a $6-billion smelter plant at Khalifa Port and Industrial Zone (KPIZ), which will have an annual production capacity of 700,000 tonnes per year.
A smelter designed for an annual capacity of 1.2 million tonnes is currently being constructed by Dubai Aluminium and Mubadala in the same zone.
According to a report by the Abu Dhabi Chamber of Commerce and Industry,  Abu Dhabi’s GDP is projected to rise by 8.2 per cent in 2007 and is expected to maintain a steady growth rate of around 13 per cent, hitting Dh584 billion ($159 billion) in 2010.
Non-oil sectors are expected to keep a vibrant annual growth of at least 18 per cent, according to the report. The share of non-oil sectors in the GDP is expected to rise to Dh163 billion in 2007, up from Dh138 billion in 2006. It is expected to post a phenomenal jump to Dh263 billion in 2010.
The report attributed future growth in the emirate’s non-oil sector to the huge investments planned for that sector. The non-oil sector accounted for 37 per cent of Abu Dhabi’s GDP in 2006, a contribution that is expected to surge to 45 per cent by 2010.
The private sector’s significant contribution to the economic growth of Abu Dhabi has accounted for 17 per cent of the emirate’s GDP in 2006 and is expected to surge to 20 per cent in the years ahead, according to the report.
Average GDP growth over 2000-06 in the UAE was approximately 8.4 per cent, the highest in the GCC region. Manufacturing industries comprise the largest non-oil growth sector, growing by 28.1 per cent in nominal terms in 2005, followed by financial services.
Investment has been pouring into Abu Dhabi, the largest sums going into real estate, while industrial complexes such as the Industrial City of Abu Dhabi (ICAD) and the Khalifa Port and Industrial Zone are also bringing in funds. New legislation, which is more friendly to foreign investors, has further aided the positive investment climate.
The total value of UAE’s investments in the industrial sector stood at Dh70.42 billion at the end of 2006, a 3.2 per cent increase compared to 2005, according to the Ministry of Finance and Industry.
Abu Dhabi emerged as the leading emirate in terms of the value of industrial investments, accounting for 54.8 per cent of the total, or Dh38.61 billion, followed by Dubai, 23.2 per cent and Dh16.34 billion.
Meanwhile, Abu Dhabi Industrial City II (ICAD II) has attracted Dh9 billion in investments toward capital works and operating assets, according to officials.
Inaugurated recently, ICAD II, which provides for 101 commercial plots in a 10 km area in Musaffah, is the first infrastructure project in Abu Dhabi to be completed using the Public-Private Partnership (PPP) model.
The ICAD II partnership between the public and private sectors is represented in Abu Dhabi Commercial Bank and Macquarie Bank.
Nearly 45 per cent of ICAD II land has already been tenanted with the remaining 55 per cent either leased or under offer, according to Zonescorp, which is responsible for developing and regulating the industrial free zones in the emirate.
“There is no doubt that Abu Dhabi is embarking on a period of sustained construction and development growth, and Zonescorp is ready to support this by initially offering another three industrial cities as demand dictates,” according to a Zonescorp official.
“All of the 101 plots in ICAD II are subject to agreements with investors/tenants. Many of our investors have already commenced, or even completed, the construction of their facilities, and the remainder companies are in the process of finalising their preparations,” says Zonescorp chief executive officer Jaber Hareb Al Khaili.
Zonescorp has launched ICAD III to meet growing demand.
“The physical works for ICAD III are already underway and we intend to use ICAD III to introduce new models of partnership with the private sector for the promotion of industrial development,” says Al Khaili.
ICAD III will be developed to suit key target industries that have been identified under a comprehensive industrialisation strategy formulated by Zonescorp with support from the Department of Planning and Economy, and other key government boards and agencies.
Meanwhile the Khalifa Port and Industrial Zone project, launched in 2006, is coming up in Taweelah. Located midway between Abu Dhabi and Dubai it will be a state-of-the-art and efficient port.
Once completed the operations of the existing Port Zayed will be shifted to the new Khalifa Port. The port will be complemented by an industrial zone, namely the Khalifa Industrial Zone, spreading over 100 sq km and catering to a number of industries including base metals, heavy industry, chemicals, trade and logistics, building materials and medium and light industries.
A number of industrial players have already committed to establishing capacity at Khalifa Industrial Zone, including a steel mill and the smelter being developed by Dubal and Mubadala.
Another port is coming up in the industrial township of Musaffah and will be operational in 2009.