ECONOMIC DEVELOPMENT - UAE Interact

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104UNITED ARAB EMIRATES YEARBOOK 2006ECONOMIC DEVELOPMENT105for both local and foreign investors. Prior to its merger, the Department of Economyoversaw the formation of GHC, which is responsible for privatisation of companiesthat previously came under the aegis of the General Industries Corporation (GIC).GENERAL HOLDING COMPANY (GHC)GHC is a new public joint stock company that has taken over factories and plantspreviously owned by the General Industries Corporation (GIC). It aims to fully orpartially privatise these companies. The enacting legislation was Decree No. 5for 2004. The aim of the privatisation programme is to strengthen partnershipbetween the public and the private sector by selling shares to UAE nationals. It isalso stimulating the UAE stock market. One of the first steps was the initial publicoffering (IPO) for the Emirates Foodstuff & Mineral Water Company.In collaboration with other government bodies like the UAE Offsets Group andthe Mubadala Development Company, it is also looking at new areas for economicdiversification. Among these are the development of the Industrial City of AbuDhabi (ICAD) at Mussafah and also drawing up of a tourism strategy for Abu Dhabi.MAJOR INDUSTRIESClusters of industrial projects have been created throughout the UAE at primelocations such as the Industrial City of Abu Dhabi (ICAD), Jebel Ali Free Zone andHamriyah Free Zone. ICAD is located 30 kilometres from the centre of Abu DhabiCity and 25 kilometres from Abu Dhabi International Airport. Its range ofservices include a ‘one-stop-shop’ for issue of industrial licences; provision ofsuitable development sites for factories; issue of custom exemption for goods,equipment and machines imported by the factories and solving all obstaclesfacing industrial projects.ICAD has shown very rapid recent growth with 355 major manufacturingcompanies employing more than 30,000 workers established there. The cityprovides all basic services and facilities for a wide range of industrial activities.Of over 350 manufacturing units operating in ICAD, 23 per cent are engaged inmetallic industries, 21 per cent in construction materials, 16 per cent in fibreglassprojects, 10 per cent in the petrochemical sector, 8 per cent in foodstuffmanufacture, 6.5 per cent in computers and equipment assembling, and 4 per centin garments and textiles.Certain heavy industries of strategic importance are being developed at ICAD.One that will have considerable regional significance is that of steel manufacturing.In early September 2005 the Abu Dhabi government signed a preliminaryagreement with Danielli, an Italian company, with a view to reaching finalagreement for construction of a steel manufacturing complex expected to cost inexcess of Dh2 billion (US$545 million). Once completed, it will be the largest ofits kind in the UAE. The new steel complex will also house the GHC steel factorywith the addition of two new steel rolling lines and an integrated steel millcomprising two units for direct reduction and smelting. With a production capacityof around 2 million tonnes a year, the complex is set to meet market demand of4 million tonnes per year and post an annual growth of about 15 per cent.Dubai has dramatically stepped up its own drive to attract capital and to expandits manufacturing base to gradually replace its dwindling earnings from oil exports.But, despite its industrial base, Dubai is not a major manufacturer. The vast majorityof goods passing through its ports are in transit. The emirate’s economic focus hasbeen on development of trade, tourism, communication and finance. Its largestindustrial manufacturing venture is Dubai Aluminium Company (Dubal), whichhas been going through an almost continuous expansion programme over the pastfew years. This operation has also spawned other connected industries such asEmiroll, which is being set up to manufacture sheet aluminium. Dubai Dry Docksis the emirate’s largest service company with four large dry docks, one of which isthe largest of its kind in the world. A Jebel Ali based ship-repair facility adds to theattractiveness of Dubai as a strategically-placed maritime centre.Sharjah’s manufacturing sector continues to focus on textiles and light industriesand has been involved in modern industrial development for over three decades,since it started to earn revenues from oil exports. Its deep-water harbours atPort Khaled in the Gulf and Khor Fakkan on the East Coast, together with itsinternational airport, provide integrated communication and transport solutions insupport of companies operating there. Industrial development is concentratedin two designated areas, Sharjah Airport International Free Zone (SAIFZ) set up in1996 and the Hamriyah Free Zone (HFZ) created in 1998. On the large industryside, Sharjah has a cement factory that utilises gas from the onshore Saja’a field,and two plants that manufacture steel pipes.The Northern Emirates have continued their investment in agriculture, ceramics,cement and maritime industries, with an increasing emphasis on creating thenecessary infrastructure for tourism, in particular in Fujairah and Ra’s al-Khaimah.The Ra’s al-Khaimah government recently set up a Dh1 billion technology andindustrial fund that will be dedicated to promoting industry and technology inthe emirate through joint ventures between businesses in Ra’s al-Khaimah andoutside specialised organisations. One of the first projects to gain funding was theGeorge Mason University, RAK Campus.THE UAE OFFSETS GROUP (UOG)The UAE Offsets Group was established in 1992 to implement the UAE OffsetsProgramme and to act as a conduit between international contractors and the localprivate sector for the creation of commercially-viable, profitable and sustainable
106UNITED ARAB EMIRATES YEARBOOK 2006ECONOMIC DEVELOPMENT107joint ventures. It is now playing a pivotal role as a think-tank for setting up jointventures. To date, the UOG has implemented over 25 successful ventures with acombined paid-up capital of Dh5 billion (US$1.3 billion). It has also created fourjoint stock companies with thousands of citizens as shareholders, bringing intechnical expertise and know-how for establishment of new business venturesranging from ship building, aircraft leasing and fish farming to district cooling,agriculture, waste management and energy.The group is a commercially-driven entity that focuses on both the macro- andmicroeconomic aspects of the UAE’s economy to identify and implement profitableand sustainable businesses. The programme requires defence contractors tofulfil offset obligations by setting up joint ventures in the UAE in partnership withlocal businesses.UOG plays the role of a conduit between the joint venture partners. Offsetsventures should yield profits of up to 60 per cent of a contract’s value over a periodof several years – the typical duration of an offset obligation is seven years – toearn offset credits that are evaluated at several milestones during the life of eachoffset project. The performance of the joint ventures is closely monitored byUOG and, if defence contractors fail to fulfil obligations, they are required to payliquidated damages of 8.5 per cent on the unfulfilled portion of the obligation.For defence contractors with small obligations, UOG has set up the Alfiah Fund.The fund is an investment vehicle for defence contractors who can invest in itrather than setting up independent offsets projects and get credits based on thefund’s performance. The Alfiah Fund, managed by the First Gulf Bank (FGB), iscapitalised at US$10 million and seeks to maximise returns from a diversifiedportfolio of investments in civilian ventures under the UAE Offsets Programme.Initial investments of the fund in a single project range from US$500,000 toUS$3.5 million.desalination plants and industries in the UAE and Oman. Natural gas from Qatar’sNorth Field will pass through Dolphin’s giant gas processing plant at Ras Laffan.The plant will strip out valuable commercial by-products and the resulting drygas will be transported by pipeline to Abu Dhabi via Dolphin’s 370-kilometreexport pipeline. Gas is scheduled to be on-stream in the fourth quarter of 2006.Other Mubadala investments in the energy field during 2005 included expansionof the oil and gas global portfolio of its wholly-owned subsidiary, Liwa EnergyLimited. An agreement for development of the Mukhaizna heavy oil field inOman is an example of Mubadala’s interest in regional energy projects. The currentproduction of the field is approximately 10,000 barrels per day. Liwa Energyand their partners in the project expect to invest over US$2 billion to implementa large-scale steam flood to increase production from the field to 150,000 barrelsper day within the next few years.Another venture for Mubadala in Oman is its agreement to work with OmanOil Company to develop the Salalah Methanol Project. Subject to final sanction,the project will entail the development, construction and operation of a 3000metric ton per day state-of-the-art methanol plant, using natural gas suppliedby Ministry of Oil and Gas through Oman Gas Company, as feedstock.Liwa, in partnership with Occidental Petroleum and Woodside Petroleum, hasalso obtained oil concessions in Libya.Mubadala’s business interests include, among others, shareholdings in ‘districtcooling’ company, Tabreed; property company, Aldar Properties; shipping company,Eships (formerly CCU); ship-builder, Abu Dhabi Ship Building Company (ADSB);aviation and pilot training company, Horizon; UAE University Development andManagement Project in Al Ain; Imperial College London Diabetes Centre in AbuDhabi; IT company, Injazat Data Systems; and automobile companies, LeasePlanand Ferrari.MUBADALA DEVELOPMENT COMPANY AND ITS PROJECTSREAL ESTATE, PROPERTY DEVELOPMENT AND SERVICESMubadala Development, an investment company wholly owned by the Abu Dhabigovernment, was established under Emiri decree No. 12 of 2002. It has a mandateto form new companies or to acquire stakes in existing companies in the UAEor abroad and to focus on generating sustainable economic benefits for Abu DhabiEmirate through partnerships with local, regional and international investors.The company invests in a wide range of sectors, including energy, utilities, realestate, public-private partnerships, and basic industries and services, in order todiversify and further develop the economy of Abu Dhabi.Dolphin Energy, owned 51 per cent by Mubadala, is reviewed elsewhere in thischapter. Its Dolphin Gas Project, the first cross-border natural gas network inthe GCC, will supply energy for current and future power generation and waterReal Estate is a rapidly growing business in the UAE with new residential andcommercial units being constructed at a pace that seems to only just keep upwith surging demand, both from prospective occupiers and investors. The sectoris expected to see the total value of developments rise to more than US$50 billionby the year 2010. It is a highly competitive field in which the key words among allthe major companies have been quality, reliability and value for money. Some ofthe biggest operators are Aldar in Abu Dhabi (a Mubadala company) and Nakheeland EMAAR, both based in Dubai.A new property law for Abu Dhabi, issued in August 2005, paved the way for theproperty market in Abu Dhabi to attract new investment. Under the new law,foreigners can own property in investment areas in Abu Dhabi under a 99-year
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