SKIES NOT THE LIMIT


Mehmood-Ul-Hassan Khan

Under the visionary leadership of the United Arab Emirates, the country is making new achievements in many sectors. Macro-economic indicators like heavy inflows of foreign direct investment, high ratios of merger and acquisition, institutionalization of IT, high levels of trust on government functions/entities, and the last not the least high economic freedom criteria the UAE has established new records of productivity, efficacy, and sustainability during 2009 despite the sever global economic recession and financial crunch. It seems that skies are not the limit for the ongoing socio-politico-economic caravans of the UAE leadership and people alike.

High expectation of capital investments

According to the latest report Abu Dhabi is expected capital investments of over Dh45 billion in the next five years. It seems that Abu Dhabi has won investor’s confidence as it attracted more investments due to the several policy initiatives launched in recent years by its visionary leadership.

Statistical data

According to the official report the Abu Dhabi economy has attracted new capital investment by 11,357 of private companies estimated capital of over Dh5.7 billion, a growth of 40 percent over the 2008. The commercial sector ranked first by attracting capital investment in excess of Dh4.9 billion. Investment in the professional, industrial and handicraft segments of economy registered investments of worth Dh271 million, Dh453 million and Dh132 million respectively. It report says that the commercial sector has the largest number of new firms at 7962, followed by handicraft at 2728, professional at 479 and industrial at 188 in the emirate.

Sector Investments/Contribution
Commercial firms Dh834.2 billion
Industrial firms Dh3.2 billion
Professional Dh2.1 billion

Furthermore, in terms of the increase in the number of firms, the industrial sector topped the ranking with a growth rate of 112 per cent, taking the total number of firms to 188 in 2009 up against 89 in the previous year. The professional sector came on the second place recording a rise of 44.5 per cent to 479 in 2009 from 332 in 2008. With a growth rate of 41 percent the firms in the commercial sector grew to 7962 while companies dealing in handicraft sector grew by 30 per cent. Forms from Italy invested capital worth Dh254 million, followed by Japan at Dh104 million and the last not the least China at Dh76 million. Saudi Arabia invested Dh68 million followed by Bahrain’s invested Dh46 million.

National companies of the UAE also played very important role in seeking of new capital investments (Dh5 billion) during 2009 and most of them remained operational through joint ventures. In terms of the number of new companies, Egypt took the lead having 476 firms; Pakistan came in the second rank with 449 new firms; Bangladesh 319; India 232; and Afghanistan 105. Moreover, total capital of 71,100 companies registered in Abu Dhabi is over Dh840 billion.

11th most popular FDI destination

According to the latest international survey for investor confidence UAE is the 11th top FDI destination in the world. The survey further suggested that investor confidence in Middle East economies has grown despite global crisis and the UAE is well placed to attract FDI in 2010. The UAE achieved all the possible parameters (ease of doing business, infrastructure quality and access to consumer market and various other criterion) to attract more and more FDI.

High economic freedom

The 2010 Index of Economic Freedom published by Washington-based Heritage Foundation and the Wall Street Journal has ranked the UAE as the 46th most economically free country, registering an increase of 2.6 points to 67.3 over the previous year. This follows a number of reforms that the UAE Government initiated in 2009. The UAE also scored higher than some of the world’s major countries such as France, Italy, Malaysia, Turkey, Saudi Arabia, Russia, India and China. Moreover, the UAE was 14th most improved economy in the 2010 Index. The UAE has encouraged the development of a more dynamic private sector by eliminating minimum capital requirements and increasing the efficiency of the regulatory framework.

Due to better crisis, and corporate management the UAE banking sector has successfully tackled the global financial crunch. The UAE’s modern financial sector has become more efficient and competitive in recent years. Financial supervision has been strengthened. Financial reforms have also been streamlined. Islamic banking is making impressive inroads. Most recent statement of also verifies it. Sultan bin Nasser Al Suwaidi, the governor of the Central Bank of the UAE claimed that the country’s economy is ‘resilient, with a 2.3 per cent rise in bank lending last year, so there is no need for the government to inject more liquidity into the banking system.

Capital markets are well developed and they have become more open to foreign investment. The last not the least overall freedom to start, operate, and close a business has improved as a result of recent regulatory reforms. Starting a business takes less than half the world average of 35 days. And obtaining a business licence takes much less than the world average of 218 days.

Ideal market place for merger and acquisition

The volumes of merger and acquisition verify the socio-economic development and financial soundness of any country and the UAE is not any exception. According to latest official data the UAE witnessed more than US$20bn (Dh73.44bn) worth of merger and acquisition (M&A) deals in 2009. The data showed that US$15.74bn, or more than 77 percent, were acquisitions made by UAE-based firms, while the remainder was of foreign companies acquiring UAE companies.

Name of the company M&A
International Petroleum Investment Company US$6.4bn
Aabar Investments US$2.93bn

UAE among most trusted entities

Edelman’s global survey released annually at the World Economic Forum (WEF) in Davos, Switzerland, has revealed that trust in government in the UAE is among the highest in the world at 67 percent, while trust in banks is high at 75 percent, compared to levels as low as 29 percent in the United States and 19 percent in Germany. Technology is the most trusted industry sector in the UAE among all surveyed groups which also verifies the rapid growth at technological fronts in the UAE. The UAE’s trust in media is higher than in most Western countries.

Information Technology Hub

According to the latest research study of Gartner enterprise and consumer IT spending in the UAE will likely reach US$15.9 billion (Dh58.4bn) this year, a 9.1 percent increase from 2009. The fastest growing segment will be computing hardware with 10.6 percent growth. It seems that rapid growth in overall infrastructure projects the UAE is a hybrid state transitioning from an emerging to a developed economy. Telecom will represent 79 percent of total IT spending in 2010. Mini notebooks will gain relevance.

Concluding Remarks

Economic is a complicated subject which works in integration and requires proper planning and vision. Continuation of structural reforms, activation of financial regulatory bodies, institutionalization of crisis management and high levels of good governance supports the onward march of the UAE in right direction. Due to strong political commitment, bureaucratic conviction, inter-state coordination, cooperation among the different departments and public-private contribution the UAE is successfully pursuing its dreams of socio-economic progress.

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