In a 2015 speech, Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, posed a question to an audience at the World Government Summit about the future of the UAE: "There will be a time, 50 years from now, when we load the last barrel of oil aboard a ship. The question is, after we have loaded this last barrel of oil, are we going to feel sad?" Sheikh Mohamed went on to say “If our investment today is right, I think – dear brothers and sisters – we will celebrate that moment”.
The UAE has been working for years in preparation of this moment, as have other GCC countries – and rightly so. In 2018, hydrocarbons contributed more than 50 per cent to Kuwait's GDP. Qatar was just under half. The situation is particularly acute for countries whose reserves are dwindling. Bahrain is expected to run out in a decade, Oman in 25 years.
Hydrocarbons are still a significant asset. A recent spike in prices is a sign of global instability, and while it means more revenues for oil producers, the UAE is among those countries that prefers stable prices over all else. For hydrocarbons, what goes up must come down – sharp fluctuations are not good for markets.
That is why the UAE has ensured it diversifies its investments. In the same speech, Sheikh Mohamed said: "Our best bet at this period of time where we have wealth is to invest all our resources in education." Alongside education, recent years have seen complementary policies to create a business environment where every aspect of diversification is supported and harnessed, be it through talent visas, easing the setting up of businesses and start-ups, or more generally creating a tolerant, open society.
It is paying off. Yesterday, The National reported on S&P Global Dubai Purchasing Managers' Index climbing to 55.5 in March from 54.1 in February. That means that last month business activity in the emirate's non-oil private sector surged to a 33-month high. Travel and tourism, the lifting of Covid-19 restrictions and Dubai Expo 2020 are primary causes.
The news came as the UAE Cabinet approved a strategy to make the country's digital economy contribute 20 per cent to the gross non-oil national economy within the next decade. The UAE's neighbours are following suit. In November, a Strategy& report found that the digital economies of GCC countries are growing twice as fast as their advanced-economy counterparts. The expansion, according to the global management consultancy firm, could add up to $255 billion to regional GDP and match the sophistication of those in Organisation of Economic Co-operation and Development countries in five years.
Embracing this particular sector is about more than simply importing an industry doing well for advanced foreign economies. Digital technologies are constantly evolving, and by having strong domestic industries, GCC countries can shape the sector technologically and in terms of governance. Cryptocurrencies, for example, are a promising but somewhat anarchic trend in pressing need of regulation and understanding. The UAE is set to have a voice in this, following news yesterday that Binance, the world’s largest cryptocurrency exchange, received in-principle approval from Abu Dhabi to operate as a broker-dealer in virtual assets. Dubai and Bahrain have already approved the firm. The same could be said of Mark Zuckerberg's Meta, which has just opened its regional offices in Dubai.
Oil is here for now, and remains a blessing for the UAE and the global economy. But with the right foundations, its eventual phasing-out does not have to be a sad moment, but merely a transition for an economy in which, in the words of Sheikh Mohamed, "every citizen is a national resource".
