The UAE leads Gulf countries in its attempt to diversify its economy away from hydrocarbons, but the country is still overreliant on the energy sector, say analysts at ratings agency Standard & Poor’s.
“The [UAE] economy appears [to be] the most diversified in the GCC,” said the report. But “in our opinion [it] remains dependent on hydrocarbon revenues”.
The need to diversify away from energy is a high priority for the country’s rulers, who have used sovereign wealth funds to support new industries.
In Abu Dhabi, Mubadala Development has acted as a key investor to develop non-oil industries, including light manufacturing and aerospace, while the Investment Corporation of Dubai invests in the emirate’s real estate, transport and retail sectors.
The UAE’s rulers have stated their aim to move towards a “knowledge-based economy”, as part of the country’s “Vision 2020” development plan.
The Government has sought to build national champions in key industries – most notably Arabtec in the construction sector, and Etihad Airways in aviation.
The report said that the UAE has a “relatively high” fiscal break-even price of US$80 per barrel, meaning that the country will run a deficit if the price of oil falls below this level. This break-even point is higher than Saudi Arabia, Qatar, Oman, Kuwait and Bahrain.
However, the country has 81 years of known hydrocarbon reserves, at its current levels of production, which means that diversification is less urgent than for other Gulf nations. Bahrain and Oman have 11 and 21 years of reserves remaining at current levels.
Only 5 per cent of Dubai’s economy is accounted for by oil and gas, which has encouraged the emirate’s rulers to develop other key industries – largely tourism, real estate, logistics, and aviation – in a bid to keep growth rates high.
This has helped to decrease the country’s reliance on hydrocarbon exports by 15 per cent since 2001, as other industries have grown in importance.
S&P’s analysts point out, however, that much of the diversification taking place in the Gulf is in downstream segments of the energy industry – refining, marketing and distribution of energy products. Although technically contributors to an economy’s non-oil sector, downstream industries will still be affected by changes in the demand for oil.
The analysts conclude that diversification away from oil and gas could boost the credit ratings of Opec states, including the UAE.
Abu Dhabi earns 65 per cent of its revenues from the oil and gas sector.
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Other workplace saving schemes
- The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
- Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
- National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
- In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
- Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
Saturday's schedule at the Abu Dhabi Grand Prix
GP3 race, 12:30pm
Formula 1 final practice, 2pm
Formula 1 qualifying, 5pm
Formula 2 race, 6:40pm
Performance: Sam Smith
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Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Install an air filter in your home.
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Shower or bath after being outside.
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Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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Our legal columnist
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Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
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Canadians living in the UAE can register to vote online and be added to the International Register of Electors.
They'll then be sent a special ballot voting kit by mail either to their address, the Consulate General of Canada to the UAE in Dubai or The Embassy of Canada in Abu Dhabi
Registered voters mark the ballot with their choice and must send it back by 6pm Eastern time on October 21 (2am next Friday)
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
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COMPANY PROFILE
Name: HyperSpace
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Based: Dubai, UAE
Sector: Entertainment
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Producer: Ronnie Screwvala
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Starring: Irrfan Khan, Dulquer Salmaan, Mithila Palkar
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German intelligence warnings
- 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
- 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
- 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
The Sand Castle
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DMZ facts
- The DMZ was created as a buffer after the 1950-53 Korean War.
- It runs 248 kilometers across the Korean Peninsula and is 4km wide.
- The zone is jointly overseen by the US-led United Nations Command and North Korea.
- It is littered with an estimated 2 million mines, tank traps, razor wire fences and guard posts.
- Donald Trump and Kim Jong-Un met at a building in Panmunjom, where an armistice was signed to stop the Korean War.
- Panmunjom is 52km north of the Korean capital Seoul and 147km south of Pyongyang, North Korea’s capital.
- Former US president Bill Clinton visited Panmunjom in 1993, while Ronald Reagan visited the DMZ in 1983, George W. Bush in 2002 and Barack Obama visited a nearby military camp in 2012.
- Mr Trump planned to visit in November 2017, but heavy fog that prevented his helicopter from landing.
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How to avoid crypto fraud
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