Abu Dhabi: 2013 report puts second five-year plan in spotlight

Building a long-term, sustainable economy remains the priority - Sheikh Hazza bin Zayed, National Security Adviser and Vice Chairman of the Abu Dhabi Executive Council.

Sheikh Hazza bin Zayed, the National Security Adviser and Vice Chairman of the Abu Dhabi Executive Council. Ryan Carter / Crown Prince Court - Abu Dhabi

Abu Dhabi is finalising its second five-year plan which will take the emirate closer towards its long-term goal of creating a sustainable, diversified economy, according to Sheikh Hazza bin Zayed, the National Security Adviser and Vice Chairman of the Abu Dhabi Executive Council.

Sheikh Hazza said that, over time, the emirate aimed to build a sustainable, free-market economy in which both the public and private sector would compete on an equal footing. He added that given the challenging, global economic climate, the Government had decided to carry out an extensive review of Abu Dhabi's capital projects to ensure the emirate's resources were being optimised.

The interview below with Sheikh Hazza appears in The Report: Abu Dhabi 2013, the latest edition of the annual economic guide to investing in the emirate. It will be published in February by the global research and consultancy company Oxford Business Group.

How has economic policy been changed as a result of the global financial crisis? Have the targets of Economic Vision 2030 been revised?

Sheikh Hazza: Since 2008 the global economy has been under severe pressure, and this has been compounded by unsettled geopolitical events across the Middle East. The banking crisis has evolved into a sovereign debt crisis which caused widespread damage to the global financial system. Political actors and government leaders across the world are now facing serious challenges. It was within this context that the Abu Dhabi Government decided to carry out an extensive review of its capital projects, with the aim of optimising our resources while effectively addressing the strategic issues that emerged as a result of changes in the global economy. In this regard, our re-prioritisation of projects was a success. Our long-term strategy, as articulated in the Abu Dhabi Vision 2030, remains unchanged, yet it was clear that our short-term priorities needed to be altered to accommodate the changing realities on the ground. Our economic priorities are therefore targeted towards building a long-term sustainable economy. This is to be done through ensuring a balanced social and regional economic development approach that brings benefits to Emirati citizens and residents of the UAE in general.

Such an approach reflects the vision of Sheikh Khalifa, President of the United Arab Emirates, and the follow-up of HH General Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, while focusing on economic diversification and non-oil dependent economic growth.

To implement this strategy more effectively, we are now in the final stages of developing our second five-year plan for the emirate, in which we will be dealing with short-term priorities and pursuing the long-term policy agenda linked to Economic Vision 2030. The initial plan was the 2008-2012 five-year economic development strategy plan.

In what ways will the development projects announced in January 2012 help to boost the overall infrastructure and industrialisation process?

Sheikh Hazza: The overall infrastructure and industrialisation process is driven by our economic diversification strategy. This is currently evolving in eight different areas: cultural tourism, aviation, manufacturing, media, health care, petrochemicals, financial services and renewable energy. These priorities are reflected in the list of projects announced by the Executive Council in January 2012. For example, the Abu Dhabi Louvre and the Abu Dhabi Guggenheim museums projects on Saadiyat Island will form the cornerstone of our strategy of diversifying cultural tourism.

We have started the process of capacity building in the high-tech aviation industry through Mubadala's investment in Strata. Moreover, we have invested heavily in the aluminium, steel, copper and petrochemicals sectors through Abu Dhabi's General Holding Corporation - the UAE's largest industrial conglomerate and a key player in implementing the Abu Dhabi Government's industrial diversification policy. We are actively reviewing our investment in the media sector to ensure that it generates a contribution to our GDP.

The decision to set up a branch of the well known Cleveland Clinic, which will provide competitive medical services, was also announced in January. Our decision to diversify into renewable energy has achieved desirable results through the work being carried out at Masdar City and the Masdar Institute of Science and Technology. Lastly, the solar power plant Shams announced in January is our first local renewable energy project to be implemented.

How can the Government ensure that its spending programme will benefit, rather than compete with, investments from the private sector?

Sheikh Hazza: Financial and monetary policies are the Government's task; such policies are used to limit economic fluctuation and boost sustainable economic growth. However, the private sector is a strategic partner that effectively supports the public sector and contributes to the implementation of the Government's economic plans. Electricity, maritime transportation and aviation, among others, are vital areas in which the private sector is actively involved. To fulfil the economic strategy, the Government has set strict standards to ensure that the investment programme benefits rather than contends with the private sector. The Department of Economic Development, for instance, has been charged with empowering the private sector and establishing a business environment that favours private-sector involvement. Initiatives include the streamlining of the business registration process, support for small and medium- sized enterprises (SMEs) and the privatisation of certain government services.

The Government has recently established the Office of State-Owned Enterprises, which has as one of its priorities the establishment of appropriate governance structures to ensure that state-owned enterprises do not enjoy an unfair advantage over the private sector. State-owned enterprises have been encouraged to collaborate with the private sector and, wherever possible, to include the private sector in new investment opportunities in which business risks and benefits are shared. For example, Abu Dhabi Basic Industries Corporation, which is a subsidiary of General Holding Corporation, works in partnership with various leading industrial establishments with high levels of expertise, and contributes in providing resources such as capital, land and raw materials.

SMEs are the bedrock of any sustainable economy. For a variety of reasons and because of the nature of these enterprises, the Khalifa Fund for Enterprise Development was set up to provide an integrated system of support services for entrepreneurs. These include training, development, data and consulting services, in addition to a number of marketing-focused initiatives.

To what extent has the privatisation of some government services helped to increase competencies, and has it allowed the Government to focus on other key areas?

Sheikh Hazza: Following the overall development and diversification of the economy, the Government is privatising some services. The aim is to focus on key and strategic sectors or involve the know-how owners in other sectors. Notably, electricity and water supply was outsourced to the Abu Dhabi Water & Electricity Authority, municipal services such as street cleaning and garbage collection were privatised, and so were catering and aircraft maintenance in the aviation sector, as well as much of the infrastructure construction. In the health and education sectors, the Government has entered into partnerships with the aim of improving the operation and governance of service provision.

Our ultimate goal is to set up a sustainable free market economy in which all entities, both public and private, compete on an equal footing, and the Government is able to concentrate on issues of policy development and managing the emirate's affairs.

What steps are being taken to increase labour productivity in Abu Dhabi in line with the objectives outlined in Economic Vision 2030?

Sheikh Hazza: One of the areas that needs particular focus if we are to achieve our economic vision is the development of a highly skilled and productive labour force capable of adding significant value within a knowledge-based economy. Labour productivity is closely linked both to education and investment in research and development. By international standards, higher productivity is usually connected with higher levels of technological input in the process of generating economic value. To address this issue we have established the Technology Development Committee, which is charged with the creation of a science, technology and innovation policy that can be implemented as part of Abu Dhabi's five year-plan.

The political recommendations in this regard focus on five main areas: raising the standards of education in science, technology, engineering and mathematics; and promoting research and development by growing government investment in research and development.

To this end, the Government has launched a number of initiatives, such as the Technology Innovation Centre. Such initiatives aim to streamline new product development and boost the SMEs working in the fields of science and technology. The ultimate goals are to form a vibrant local technology enterprise base; provide specialised infrastructure to promote a symbiotic cluster effect with other industries; and introduce new laws and regulations that are specifically tailored to supporting a knowledge economy.

We have already taken steps to begin this process. For example, Mubadala has made strategic investments in advanced technology in the aviation and the microchip-manufacturing industries, and students have already been sent for training to these companies. The Masdar Institute of Science and Technology has recently offered postgraduate degrees on a part-time basis to allow employed people to enhance their technical qualifications. Similarly, branches of internationally distinguished universities, such as the Sorbonne and New York University, have established campuses in Abu Dhabi offering postgraduate courses to local students.

In terms of improving productivity in the public sector, Abu Dhabi's Centre for Excellence undertakes turning out highly skilled staff with the best international training standards.

How will the Government's economic and social initiatives in the Abu Dhabi Western Region (Al Gharbia) and Al Ain help to ensure balanced development throughout the emirate?

Sheikh Hazza: I stated at the beginning of our interview that our economic priority is building a long-term sustainable economy by ensuring a balanced social and regional economic development approach that brings benefit to all. In 2012 we have stepped up our regional social and economic investment programme by means of new housing, community and healthcare facilities, major urban infrastructure projects, along with the establishment of two new industrial cities in Al Ruwais and Zayed City in Al Gharbia. This has helped to create jobs for the residents in these areas, while upgrading their standard of living with high-quality housing and social services.

* Oxford Business Group Abu Dhabi Report 2013