The long-term key: diversify

Abu Dhabi's budget surplus is based on oil and gas revenues, and the emirate's economic vision for 2030 would reduce that dependency.

Mohammed Ahmed al Bawardi, centre, secretary general of the Executive Council, discusses the 2030 economic plan with Waleed al Mokarrab al Muhairi, left, director general of the Abu Dhabi Council forShow more

ABU DHABI //Abu Dhabi must diversify its economy away from oil and foster the expansion of other sectors to sustain its long-term growth, according to Abu Dhabi Economic Vision 2030. "Economic diversification is common and fundamental to the Government's other stated priority areas and the policy agenda as a whole," it says. Oil and gas exports accounted for 74 per cent of Abu Dhabi's revenues between 2000 and 2005, a figure higher than the other oil-rich countries in the Gulf.

Ideally, the proportion of revenues derived from finite petrochemical resources should decline to about 50 per cent, according to the report. That would help the Government maintain spending on key infrastructure and development projects even as oil begins to run out. "As budgetary commitments increase to serve a larger population and a more developed economy, over-reliance on revenues from oil and gas exports will constrain the Government's ability to meet its spending plans," the report says.

"When oil revenues are removed from the fiscal balance, Abu Dhabi's comfortable budget surplus becomes a fairly large, and possibly unsustainable, deficit." In 2006, Abu Dhabi's non-oil trade deficit reached US$21 billion (Dh77.13bn). Diversification would also help stabilise the emirate's rate of growth, making its expansion less dependent on the often fickle swings of international oil prices. The emirate would benefit from "a more sustainable pattern of growth, in which it can guarantee healthy economic development over extended periods of time".

To achieve diversification, the Government plans to focus on developing the aviation, pharmaceuticals, tourism, health, transport, media, financial and telecommunications sectors. The emirate's burgeoning education sector is also a key to achieving this growth, as educational institutions can provide skilled workers to help develop industries across all sectors. Companies, in turn, will help fund educational programmes.

Abu Dhabi has already attracted international educational institutions such as the Paris-Sorbonne and New York University, but the 2030 economic vision acknowledges "the sector is in its infancy" and must continue to expand. The report states that the emirate should encourage universities to expand their research activities to become "world class". Prof Jim Mienczakowski, the head of higher education at Abu Dhabi Educational Council, said this was pivotal to the capital becoming a leading global city.

"You cannot overestimate the importance of developing a higher-education sector which is competitive internationally," he said. "If you don't have the edge in terms of the generation of knowledge, rather than buying it in as a commodity, you cannot be an equal player in the world. You're always a consumer, not a provider. The vision of the Abu Dhabi leadership is that we become a hub of learning and knowledge not just in the Gulf, but in the world."

The 142-page report says particular attention will be focused on distance learning and e-learning, the latter benefiting from Abu Dhabi's expertise in e-business and e-government. In pharmaceuticals, Abu Dhabi aims to become a thriving research and development centre by attracting investment, strengthening intellectual property rights and formulating a drug-testing system. Further expansion of the education sector is needed to help train medical staff as Abu Dhabi develops into a centre for health tourism.

As well as training staff locally, the emirate will need to attract doctors and specialists from overseas and make large investments in technology. Tourism in general also has been earmarked for expansion and a string of hotels, resorts and shopping centres are planned to help bring in visitors. Abu Dhabi is looking to position itself as a magnet for cultural tourists, helped by projects such as the Saadiyat Island Cultural District and new museums.

The emirate is, the report states, "investing large amounts of funds and energy" into tourism with a particular emphasis on high-end visitors. The Abu Dhabi Tourism Authority has opened offices in Germany, France and Britain, and over the next few years will set up branches in other locations to help attract wealthy holidaymakers. The financial services industry should also grow substantially in the coming years, with the city becoming a "regional centre" that will provide well-paid jobs for Emiratis and high-calibre expatriates.

Aviation, aerospace and defence are also included in the list of "engines of future economic growth", with the report stating that the capital already has "a core of infrastructure" in aerospace. Officials hope to see the emirate further develop as a centre for the manufacturing and maintenance of aerospace and defence equipment, while becoming a "world-class player" in aircraft maintenance. Its central location will aid Abu Dhabi's ambition of becoming a centre for logistics, complemented by investments in the airport, a new port and road and rail network. Improved transport links will spark continued expansion in manufacturing and other export industries.

The report says this will also assist the expanding media industry, which will supply mature markets in Europe as well as growing ones in the Middle East, South Asia and Africa. Electronic media will be one of the main areas for future investment, further diversifying the economy into areas other than oil and gas. [e-mail] [e-mail]