From a foreign investor’s perspective, what are the advantages of Abu Dhabi and why should foreign investors partner with ADBIC?
AL DHAHERI: The Abu Dhabi government has developed an economic vision that aims to grow GDP from $100bn to $400bn by 2030. The economic vision aims to diversify Abu Dhabi’s economy away from oil and gas. Abu Dhabi has identified 17 sectors to drive this economic ambition. 10 out of those 17 sectors are focused on manufacturing and industry. Abu Dhabi has several natural advantages such as access to capital, energy, and valuable resources; access to the GCC and proximity to regional growth markets such as the MENA region; and membership in the Greater Arab Free Trade Area (GAFTA), which includes 18 Arab members (Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Palestinian territories, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, Yemen). Additionally, the government has been working on multiple fronts to enable growth. They’re developing efficient and industry supportive infrastructure with an investment of over $29bn in the Khalifa Industrial Zone Abu Dhabi (KIZAD), Abu Dhabi International Airport, Etihad Railway, and industrial cities. The government is promoting a business friendly and robust regulatory environment and supporting national champions to achieve growth objectives. They’re also investing in education infrastructure and forming partnerships with leading universities to cater for Abu Dhabi’s needs.
ADBIC is wholly owned by the General Holding Corporation (GHC), which is in turn wholly owned by the government of Abu Dhabi. GHC is active in 5 of the 10 manufacturing sectors identified in Abu Dhabi’s Economic Vision 2030, and manufacturing and industry currently accounts for roughly 10% of Abu Dhabi’s industrial GDP. ADBIC and GHC have taken a proactive approach to identify projects within these economic sectors. ADBIC is currently developing anchor projects in metals, petrochemicals, and polymer conversion that will contribute to achieving Abu Dhabi’s Economic Vision 2030 and increasing the group’s contribution to Abu Dhabi’s industrial output. ADBIC’s development approach ensures coordination among Abu Dhabi based national champions. GHC is an industrial powerhouse that knows the local landscape and has a track record of developing world class businesses such as the National Petroleum Construction Company (NPCC), Emirates Steel (ES), Ducab, and Arkan.
What impact did the global economic downturn have on domestic and foreign investment in basic sectors (e.g. metals, petrochemicals and polymer conversion) in Abu Dhabi?
AL DHAHERI: Abu Dhabi’s economy is interconnected with the rest of the world, as such, the global economic slowdown has affected the way ADBIC pursues its developments in metals, petrochemicals, and polymer conversion. The slowdown did affect ADBIC but there are positives around that. Many companies became cautious about investing in Abu Dhabi which is good for us because we are seeking real partners who value the long-term relationship and who look at the market with a long-term view rather than the short-term. The slowdown has allowed ADBIC, along with its partners, to reduce several costs and CAPEX elements due to the reduction in commodity prices and costs of construction services. The slowdown has also provided ADBIC with several acquisition opportunities that are currently under assessment thus allowing us to achieve our ambitions at a faster pace.
How significant will manufacturing and industry be in driving the future growth and development of Abu Dhabi?
AL DHAHERI: Abu Dhabi has adopted a very ambitious economic plan that aims to expand the economy 4 fold, from $100bn to $400bn by 2030; increase the contribution of non-oil sectors, from 40% to around 64% by 2030; and promote the contribution of manufacturing and industry, from around 12% to 25% by 2030, which translates to growing the manufacturing and industrial sectors from $10bn to $100bn. The government has created industrial champions such as ADBIC and GHC to ensure that its plans and ambitions are met. In order to achieve these ambitious targets, we are looking to partner with world class players. We aim our development approach to ensure that our investments also open the doors for SMEs that can offer services and build on our products and investments.
Why is clustering important to ADBIC?
AL DHAHERI: ADBIC is trying to create a number of industries. The way to do this is to start with clustering. The clustering approach is very important. We are trying to complement on a number of industries, to build a chain where we create the addition of value. One example is what we are doing with aluminium. We are complementing what other businesses are doing in this industry. As such, we can see the creation of Emirates Aluminium Smelter, which is owned by Mubadala and Dubal. We are working very closely with them in order to enhance the value of that end product. We have conducted a study in order to understand exactly what type of businesses that we can create in order to add value. We have come up with a number of projects and we recently signed a joint venture agreement with Gulf Extrusion for one of these projects. The investment is worth around $200m. This is only the start. Other small and medium businesses could be established based on this project, which could take our end product, feed-stock, as input into their business. There are also opportunities for business that could provide services to those companies.
The GCC produces 13% of the world’s plastic raw materials. This is expected to increase to 20% in the next 5 years. Middle East ethylene capacity will reach 35m tons per annum by 2015. It makes economic sense to integrate upstream, midstream, and downstream industries within the region.
What is ADBIC doing to ensure development of downstream industries?
AL DHAHERI: ADBIC aims to develop projects that have significant downstream development potential and which allow for the development of small and medium businesses. We have been actively working in this regard with the Khalifa Fund and have identified several small and medium project opportunities that we are currently promoting to local entrepreneurs. In February 2011, we put together a document to share with people who are interested in being involved in these initiatives. We shared exactly what we had been doing with respect to the industrial cluster and how these initiatives will enable their SME opportunities to be realized.
Asian and Middle Eastern countries are actively developing their own industries, are you concerned that current customers will become future competitors in the petrochemicals and polymer conversion sectors?
AL DHAHERI: The petrochemicals and polymer conversion industries are growing and we expect that GCC based producers will grow alongside other players, regionally and internationally. We expect that GCC based polymer conversion industry production will partially replace imports into the region. Petrochemical refining capacity in the region is growing, as is the feed-stock supply. The GCC produces 13% of the world’s plastic raw materials. This is expected to increase to 20% in the next 5 years. Middle East ethylene capacity will reach 35m tons per annum by 2015. It makes economic sense to integrate upstream, midstream, and downstream industries within the region. Developing the downstream polymer conversion industry will create regional manufacturing, jobs, local know-how, and a sustainable industrial base. The polymer industry also adds significant value to locally produced feed-stock. So overall, we are not very concerned about current customers becoming future competitors.