Abu Dhabi is the capital of the United Arab Emirates but has historically been more conservative and less outward facing than the more ostentatious Dubai.
Abu Dhabi is home to 96% of the proven oil reserves of the UAE, and that sector, along with other types of manufacturing and production, dominate its economy. The city attracts fewer international tourists and foreign businesses than its neighbouring emirate.
However, in recent years the government of Abu Dhabi has introduced several initiatives intended to attract greater foreign direct investment (FDI) and transform the city.
Abu Dhabi has ambitions to make the city competitive with other major economic hubs both as a place to work and live.
We are not necessarily asking companies to relocate to Abu Dhabi but [we are] inviting them to plug into the various clusters and sectors that we want to double down on. Tariq Bin Hendi, Abu Dhabi Investment Office
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“London and New York have advantages when you are young and single,” says Dr Tariq Bin Hendi, director general of the Abu Dhabi Investment Office (ADIO). “But when you have children it is hard to be in Manhattan. Singapore is quite small. But we have everything right here and there are building policies and programmes to make sure people want to come and be a part of it.”
ADIO was only established in 2019 as part of a government economic accelerator programme called Ghadan 21. At the beginning of 2021, ADIO opened eight new international offices in Beijing, Frankfurt, London, New York, Paris, San Francisco, Seoul and Tel Aviv.
The last of these offices is particularly significant, part of a historic normalisation of relations between the UAE and Israel set out in the Abraham Accords signed in September 2020.
Bin Hendi says these moves represent a new “proactive” approach to FDI based on creating long-term relationships. “A lot of these countries we already have very strong relationships with, but we are trying to tap into their various ecosystems, such as financial services or healthcare,” he adds.
“We are not necessarily asking companies to relocate to Abu Dhabi but [we are] inviting them to plug into the various clusters and sectors that we want to double down on and for them to grow their businesses here.”
Sovereign investment partnership with the UK
More than half of the inward FDI to Abu Dhabi is in either real estate or natural resources, but the emirate is looking to shift that balance towards knowledge-intensive industries.
In March 2021, Abu Dhabi sovereign wealth fund Mubadala announced an £800m investment in UK life science companies as part of a sovereign investment partnership expected to lead to billions of dollars of reciprocal investment between the UK and the UAE.
UK companies already account for the largest share of inward investment to Abu Dhabi, contributing 15% of all FDI into the emirate in 2018. The UK government says trade and investment ties between it and the UAE were worth £32bn in 2019.
Bin Hendi says investment in UK life sciences is an example of building on existing international relationships to address one of Abu Dhabi’s strategic objectives. “We have unique health issues that we suffer with here in the region, whether it be disease, or the way climate affects people’s lifestyles,” he adds. “How can we take your technology as an institution, fund its localisation and development in Abu Dhabi, deploy it within our system and economy, and then take that into other countries and regions that suffer from similar issues?
“It not just a direct transfer of technology and knowledge, it is the ability to transfer that received funding in exchange for that UK company localising here and ultimately growing and diversifying its revenue base.”
As well as in the health sector, Bin Hendi identifies financial services, agritech and insurance tech as areas with high investment opportunities for the UK.
How to entice investors to Abu Dhabi?
A significant new inducement to potential investors in Abu Dhabi was the introduction of legislation in late 2020 to allow 100% foreign ownership of companies registered in the emirate.
This is a substantial change to business culture in Abu Dhabi, where typically 51% of companies based outside of free zones has had to be owned by a national. Although an exception could be granted in some sectors, qualification for these exemptions could be onerous.
When you are audacious and ambitious in what you are doing, you cannot be in an environment which is restrictive. And for us, Abu Dhabi is extremely welcoming. Christopher Reech, Peninsula Real Estate
Bin Hendi says the change is being introduced alongside an expansion of British common law across the Abu Dhabi economy, giving potential foreign investors further comfort and certainty.
Reech Corporation is a global investment group focused on financial services, technology and real estate. Its subsidiary Peninsula Real Estate is based in Abu Dhabi and the group’s chairman and CEO, Christopher Reech, says the emirate’s heavy investment in technology sectors has been a major draw for investors.
“Abu Dhabi has had a very strong view on bringing technology into its economy over the past few years,” he says. “This move on technology is far more fundamental than just diversifying the economy. They are building a nation.”
He highlights how Abu Dhabi has already launched a university completely dedicated to artificial intelligence (AI), while its government has had a dedicated ministry for AI since 2017.
“When you are audacious and ambitious in what you are doing, you cannot be in an environment which is restrictive”, says Reech. “And for us, Abu Dhabi is extremely welcoming because it gives us fertile ground for the ambitious plans that we have.”
A warm embrace for PPPs
Another sign of Abu Dhabi’s change in strategy was the introduction of a new public-private partnership (PPP) framework in 2020. While private investment has been encouraged in the power, water and real estate sectors, Abu Dhabi’s hard infrastructure has traditionally been developed and financed solely by the government.
Two new PPP tenders were launched in April 2021. One is for the design, build, finance, maintenance and transfer of three new schools under a 20-year contract, the other for the second-phase roll-out of street lighting infrastructure.
With tender announcements for further transport, education and municipal works projects imminent, Bin Hendi believes this strategy should lead to greater private investment in the wider economy.
“If you are invested in the growth of an economy, and have long-term contracts with long-term revenue opportunities, you are very likely to start looking at that city or country as a long-term base for development of other components of your business,” he says.
Bouncing back strongly from the pandemic
Bin Hendi says ADIO’s priority is to attract highly skilled labour and build knowledge-intensive industries to bring both expertise and capital to Abu Dhabi.
The emirate’s population has been rising steadily for more than two decades and the education level of its population has also risen sharply in recent years.
With businesses around the globe reassessing their global footprint in the wake of the Covid-19 pandemic, Abu Dhabi’s limited exposure to the virus may add to its attractiveness.
The emirate has maintained a relatively low rate of positive cases and had vaccinated more than half its population by early April 2021. London-based analytics consortium Deep Knowledge Group ranked Abu Dhabi as the world’s safest city amid the pandemic for the first quarter of 2021.
Bin Hendi says that coming out of the pandemic, the city’s more open approach to investment and initiatives such as the Abraham Accords show it is ready to build relationships at a time when companies and workers may be looking to travel internationally again.
“We want you to live here long term,” he adds. “We want Abu Dhabi to be home, and I think the private sector engagement with the government that we are doing today is going to lead to that. We will cater to you at an individual point in your life and for your entire life, and that becomes an incredibly strong selling point.”
This article is the first in Investment Monitor’s ‘Future of Middle Eastern Cities’ series.
