ECONOMIC DEVELOPMENT - UAE Interact

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