issue 1-eng

7/31/2019 Issue 1-Eng

1/27

How can Abu Dhabind its entrepreneurial spirit?

Fit for the future:Building a robust nancial system

Zaha Hadid Masdar City The savings culture The psychology of ina

World-class healthcare Economic zones GCC monetary union

THE ECONOMIC

REVIEWEncouraging entrepreneurialism and economic growth

Summer 2009

7/31/2019 Issue 1-Eng

2/27

ADCED

it takes teamwork to win

7/31/2019 Issue 1-Eng

3/27

We are living in turbulent economic times

but here in Abu Dhabi we have much to be

positive about. Our governments conservative

investment strategy has placed us in a strong

position to weather the global downturn, not only in the banking

sector but throughout the economy. During that time, we must

brace ourselves for a slowdown in growth but unlike many

other parts of the world growth will continue.

The slowdown is an ideal opportunity to lay the foundations

for a strong and sustainable economy to take us into a prosperousfuture. That work has started with a range of positive initiatives

and we highlight just two of them in this, the launch issue of

The Economic Review.

In the nancial services sector, the governments swift and

decisive action to protect Abu Dhabis nancial system from the

credit crunch will lead to a stronger, more robust banking system

that is better able to withstand any future storms (page 18).

In the wider economy, we must encourage the development of

a bigger, more diverse private sector that will help to grow our

GDP (page 10).

The population of Abu Dhabi must take personal

responsibility too, by taking a more considered approach to

savings and by remaining condent about the times ahead

(page 5). If the government and its citizens can work together,

Abu Dhabi can emerge from the downturn as an even stronger

economy with an even brighter future.

We hope you enjoy reading this, and future editions, of The

Economic Review. We would be delighted to receive any feedback

you have. You can email us at [email protected]

Waleed Al Mokarrab Al Muhairi

Director General,

Abu Dhabi Council for Economic Development

THE ECONOMIC REVIEW SUMMER

CONT

WELCOME AGENDA: NEWS ANALYSIS5 Economy and tradeAbu Dhabi citizens need to start saving; inations

mind over matter; dirham de-pegging debate

7 Construction and infrastructureThe Modern Residential City a solution to

affordable rent prices?

8 Business environmentChanges to foreign-ownership laws could boost

FDI in economic zones

9 Social developmentAbu Dhabi has invested in medical facilities

now it needs more healthcare workers

INSIGHT:ENTREPRENEURIALISM

10 Wealth generatorsEntrepreneurs create the economic and cultural

fabric of society. They should be better valued

13 The art of doing nothingHong Kong is a textbook example of why

light-touch regulation works

14 Learning from global leadersAbu Dhabis entrepreneurs can glean valuable

lessons from the failures of other countries

16 Private tuitionTo move towards a private sector-driveneconomy, Abu Dhabi should study the US

17 Backing business dreamsEntrepreneurs in Abu Dhabi now have a better

chance of achieving their business dreams with

a helping hand from the Khalifa Fund

SECTOR FOCUS:FINANCIAL SERVICES

18 Credit crisis: how we got hereThe worlds nancial institutions are joining

forces to tackle the economic downturn. To nd

the right cure, they need to understand the causes

23 DebriefGreen living at Masdar City

24 DatabankAbu Dhabis economic indicators

26 In conversationZaha Hadid on Saadiyat Island

8

10

18

26

Cover illustration byFlat

7/31/2019 Issue 1-Eng

4/27

ADCEDdriving Abu Dhabis growth

7/31/2019 Issue 1-Eng

5/27

Ordinary UAE residents lost

hundreds of millions of dirhams

last year after falling victim to

a number of bogus investment

portfolios that promised monthly returns of 30-

40%. These scams have highlighted the dangers

of investing in short-term, high-risk, high-return

products compared to long-term savings.That hurts the entire economy, not just the

individual, says Dr Abd Al Majeed Al Heeti, an

economic adviser for the Abu Dhabi Council

for Economic Development. High savings

support economic expansion and growth as that

capital provides nance for different economic

sectors. It also helps keep ination rates down

by reducing levels of consumer spending.

But the savings habit is not deeply rooted in

Abu Dhabis culture, mainly for three reasons:

a lack of nancial awareness; a shortage of

attractive, long-term savings products; andtraditions and lifestyles.

The recent spate of fraudulent investment

portfolios emphasises the need for nancial

literacy programmes across Abu Dhabi to teach

citizens how to manage their personal savings

and to understand how nancial institutions

and products work. The long-term aim of such

programmes would be to boost levels of saving,

but that cant happen until the market offers

a better range of savings products.

Five main savings instruments are available:

the stock market; savings accounts; xed deposit

accounts; real estate; and the pension scheme

for employed nationals, managed by the Abu

Dhabi Retirement Pensions and Benets Fund.

However, most people are not attracted to these


The savings habiTBy Salwa Fadhel

AGENDA Economy and

instruments because of their low returns, which

barely match increasing rates of ination*, says

one Abu Dhabi-based banker.

However, there are cultural barriers to

overcome. People in Abu Dhabi appreciate

generosity and what they would consider to be

normal spending patterns can often be seen as

excessive in other cultures for example, thosewho earn less than AED10,000 a year regularly

spend well over three-quarters of their income

(see table). Moreover, the prominence of luxury

brands in Abu Dhabi has a strong inuence on

spending habits. Saeed Al Mehairi, a 28-year-

old Emirati who works for the government,

says: People always like to purchase the best

in the market such as the latest cars, phones,

clothes, shoes, bags and jewellery, and they

often nance that with loans.

Abu Dhabi could look overseas for

inspiration. The Monetary Authority of

Singapore oversees a national programme

called MoneySENSE, designed to educate

Singaporeans on how to save, invest and

manage their money; how to understand

In this section:The savings culture (p5) The psychology of ination (p6) GCCmonetary union (p6) Affordable housing (p7) Economic zones (p8) World-class healthcare (p9)

INcomE Groups (AED) AvErAGEINcomE (AED)AvErAGE

ExpENDIturE (AED)ExpENDIturE As

pErcENtAGE of INcomE (%

Less than 10,000 4,922 4,270 86.75

10,000-25,000 15,980 12,035 75.31

More than 25,000 55,456 27,684 49.92

Total of all income groups 20,298 12,249 60.35

Source: Department of Planning and Economy, Abu Dhabi. All income and expenditure figures are preliminary

nancial products; and how to teach

reinforce savings habits in children. Whet

such a programme would work in Abu Dh

remains to be seen, but one thing is clear

citizens need to learn to save.

*The ination rate in Abu Dhabi was 10.

in 2007, according to the DepartmentPlanning and Economy, Abu Dhabi.

Aeage ine and eendie hehld in Ab Dhabi (2007/08)

Allillustrationsby

GaryBates

7/31/2019 Issue 1-Eng

6/27THE ECONOMIC REVIEW SUMMER 2009 6

AGENDA Economy and trade

The UAE government

has put an end to the

de-pegging debate

once and for all after

announcing that it will not take

part in the proposed monetary

union agreement between the

Gulf Cooperation Council states.

It had not stated why, however, at

the time The Economic Review went

to press.

The UAE dirham has been

pegged to the dollar since its

creation in 1973 but the policy

had attracted critics, particularly

during the past two years when

the dollars depreciation prompted

HOW INFLATION PLAYS

WITH THE MINDBy Alanoud Al Alawi

Ination levels in Abu

Dhabi are falling after a

period of record rises but

during that peak, were

peoples perceptions and not

simply economic factors at play?

A rise in rents and food prices,and higher public spending,

had been highlighted by Abu

Dhabis government as signicant

contributors to rising ination.

A series of economic, scal and

monetary policies, as outlined in

theAbu Dhabi Economic Vision 2030,

have helped tackle the problem.

But evidence from other

markets suggests that the threat

posed by the psychology of

ination requires a similarlyrobust response. Perceptions

of whether ination is rising or

declining in any economy play

a vital role in how people invest,

save and spend. They also affect

the decisions of policymakers.

In the UK, the Bank of England

produces a quarterly survey

of ination expectations. In

May 2008, the perceived rate

of ination was a percentage

point above the actual rate. This

can become self-fullling: if

investors and consumers believe

that prices will continue to rise,

there is an expectation of higher

salaries and potentially higher

interest rates. The result? A rise

in ination despite the absence

of economic triggers.

Predictions are often based

on historical indicators, as well

as peoples responses to media

reports and rumours on the state

of the economy, regardless of

their accuracy.

In Abu Dhabi, expectations of

future price increases are fuelledby a Consumer Price Index (CPI)

that has risen every year since

2004 (see chart right).

Yet despite the effect of

the global nancial downturn

on Abu Dhabis economy,

some economists believe that

inationary causes are easing.

Simon Williams, the chief

economist at HSBC, told The

Nationalin November 2008: We

are denitely past the worst,and youll see prices not fall, but

ination moderate substantially

over the next 12 months.

How will this affect

the behaviour and attitudes of

Abu Dhabis consumers over the

next 12 to 18 months?

Professor Stephen

G Cecchetti of Brandeis

Business School recently

noted, people have selective

memories: Ask nearly anyone

about ination and they are

likely to recall price increases.

They somehow take them as

personal affronts. Probe further,

and people might admit that

the price of clothes has fallen,

or that their phone service is

cheaper; but thats not what

they remember rst.

Growth in major componentsof Abu Dhabis CPI basket(Base year: 2004)

TO PEG

OR NOT TO PEG?By Hamda Al Kindi

some to call for de-pegging.

With the recent apprecia

of the dollar, those critics w

silenced but the debate had

threatened to raise its head

again in the next few years

the GCC presses ahead with

monetary union. Whether t

new currency should be peg

to the dollar or stand alone

likely to be top of the agend

the UAE will no longer hav

revisit that question.

Speaking in the wake of

decision to pull out of mon

union discussions, Mr Sulta

Nasser Al Suwaidi, governo

2004

2005

2006

2007

Recreation, education & cultura

Food, drinks & tobacco

Transportation & commu

Rentals, water & uel

Source: Department o Planning and Economy, Abu Dhabi

AED 100

AED 146

7/31/2019 Issue 1-Eng

7/27THE ECONOMIC REVIEW SUMMER

The peg [tothe dollar]greatlybeneftedthe localeconomy

AGENDA Construction and inrastru

the UAE Central Bank, said the

UAE would continue to maintain

its expansionary monetary

policy without change and that,

therefore, the dirhams peg to the

US dollar would be maintained.The peg greatly beneted the

local economy and helped to

achieve good rates of growth in

the industrial and tourism sectors,

as well as to attract foreign

investments, Mr Sultan bin

Nasser al Suwaidi recently told a

banking conference in Frankfurt.

It has also provided a backdrop of

stability and clarity to the UAEs

monetary, scal and economic

policies. Critics claimed thatkeeping the peg would simply fuel

ination and make imports more

expensive. We were criticised

for staying with the dollar when

it was weak, so I dont think we

should be criticised for staying

with the dollar when it is strong,

the Central Bank governor told

the banking conference.

Supporters of the peg

claim an uncontrolled rise in

the value of the dirham couldmake holidaying or investing

in Abu Dhabi more expensive.

Al Mafraq, 45

kilometres outside

of Abu Dhabi city

centre, will soon be

home to the Modern Residential

City (MRC) a new development

housing 25,000 technicians,

supervisors and other workers.

What sets it apart from the other

small and inexpensive it isabout operating it fairly. It means

a personal commitment to the

tenant, Mr Fardan Hassan Al

Fardan, chairman of Al Rayan

Investment Company, the

business behind MRC,

said recently.

The MRC model is a potential

solution to the growing problem

of affordable housing for middle-

income workers in Abu Dhabi.

Rent levels for this group haveskyrocketed during the past

two years as demand outstrips

supply. In 2004, a typical three-

bedroom apartment was on the

rental market for AED60,000-

90,000 per year. Today, that

same apartment would fetch

AED160,000-200,000 a year

an increase of more than 100%.

The price rises are nancially

crippling middle-income earners

and their families. Those on

a monthly salary of AED5,000-

15,000 are spending up to 65% of

their salary on rent, compared to

just 23% for those on more than

AED15,000 per month, according

to Abu Dhabi Department of

Planning and Economy gures.

Demand for affordable housing

is expected to continue growing as

the government pushes aheadwith plans for economic

diversication, which will bring

more expatriate workers into the

emirate. Thats likely to keep ren

levels at all-time highs, unless

measures are introduced to

tackle the problem.

Past moves, such as laws

prohibiting rent rises for a xed

term, while welcomed, have bee

seen as a short-term x.

Longer term, its hoped thatthe Al Reem Island and Al Rah

Beach housing developments

will ease the supply shortage.

Located close to Abu Dhabis

business district, Al Reem Island

is expected to house more than

200,000 residents, and a further

120,000 housing units are under

construction in Al Raha Beach,

closer to Abu Dhabi Airport.

Both projects are expected

to be completed within the next

three to ve years, but their imp

may be limited if the population

continues to grow. MRC will be

in operation sooner phase one

is due for completion this Augus

while phase two will be delivere

February 2010 and, with its fo

on affordable housing, may well

the more effective way ahead.

This would dent the revenues

the country currently gets from

tourism and foreign directinvestment and make it less

competitive than other nations.

Thats not a scenario they need to

worry about any longer, however.

MRC: THE WAY

FORWARD?By Khalia Al Mehairi

housing developments currently

under construction across Abu

Dhabi is its commitment to setting

rents at levels affordable to middle-

income workers the fastest-

growing segment of the emirates

working population.

Affordable housing is not

just about building something

7/31/2019 Issue 1-Eng

8/27

IN THE ZONE

C

ould changes to

laws governing

foreign ownershipof businesses in the

UAE currently under active

government consideration boost

foreign direct investment (FDI) in

its economic zones?

For the past four years, Abu

Dhabi has been developing

and operating economic

zones as part of its strategy

to diversify its oil-dependent

economy. However, it has been

less successful than some otherregions at attracting FDI, widely

recognised as one of the main

drivers of zone development.

FDI accounted for just 13%

of the total AED34bn invested

in Abu Dhabis zones as of

December 31, 2008, according

to ZonesCorp, the government-

backed organisation that

manages and operates the zones.

Mr Mohamed Al Hameli,

director general of the Abu

Dhabi Chamber of Commerce

& Industry, believes the

AED30bn worth of local

investment in the emirates

zones marks a good start to

the programme. The zone

environment encourages locals

to have joint ventures with

foreign investors, especially

THE ECONOMIC REVIEW SUMMER 2009 8

AGENDA Business environment

in [producing] for regional

markets, he says.

Thats made possible by thecurrent statutory requirement for a

minimum of 51% local ownership

of all businesses, including those

operating within the zones, but

the law is considered to affect

Abu Dhabis ability to attract FDI

into those areas. Changes to the

rule are imminent, and many are

hoping for a removal of the cap

on foreign ownership to allow

international investors to have up

to a 100% stake in their businesses.That will almost certainly lead

to a boost in the amount of FDI

owing into Abu Dhabis zones,

in which many foreign delegations

have already expressed an interest

in investing.

Ownership rules are not

the only constraints on zone

development the availability of

adequate energy and land space to

meet growing demand also needs

to be addressed. Furthermore,

Abu Dhabi needs to continually

differentiate itself in order to

boost its volume of FDI in an

increasingly competitive market.

Dr Nermine El Shimy, chief

economic, regulatory and customer

service ofcer for ZonesCorp, says

this could be achieved by targeting

a highly specialised segment of

FDI that would facilitate the

transfer of knowledge and

know-how, in line with the Abu

Dhabis governments vision of

becoming a knowledge-basedeconomy by 2030.

Abu Dhabi is already

differentiating itself from

immediate competitors in the

Gulf through its approach to

zone infrastructure, namely its

cluster approach, which has

helped countries such as Ireland

attract FDI, and the use of

the public/private partnership

model, which the emirate has

been pioneering in the region.But, above all else, Mr Al

Hameli points out that Abu

Dhabis zone programme

must maintain credibility by

ensuring that we provide what

we promote; to do otherwise

would be highly detrimental to

the continued success of our

economic zones.

By Jennifer Green

5The current numberof economic zonesin Abu Dhabi

47sq km

The area coveredby the existingeconomic zones

3.12

bn The estimatedcost of AbuDhabis zoneinfrastructure

45The number ofcountries from

which companieshave set up in thezones, producingplastics, glass,construction

materials andchemical products

4The numberof new zonesbeing plannedin Abu Dhabi, toaccommodatehigh-value-addedmanufacturing,commercial andservice-basedindustries

117sqkm

The total landspace dedicatedto economic zonesin Abu Dhabi,once its four newzones come intooperation

Zonefacts

We mustensure that

we providewhat wepromote

7/31/2019 Issue 1-Eng

9/27

AGENDA Social develop

Abu Dhabi is

successfully building

world-class medical

facilities, but its

healthcare sector will develop

sufciently only if it can attract

enough highly qualied doctors

and medical scientists from

overseas and train local staff.Abu Dhabi boasts 3,394

doctors, 6,345 nurses and

4,338 other health professionals

including pharmacists

according to 2007 gures from

Health Authority Abu Dhabi

(HAAD). However, the authority

estimates that it needs a much

higher number of qualied

medical staff to increase the

healthcare sector.

Increasing staff numbers willbe a challenge not only is there

a shortage of homegrown medical

school graduates, historically, Abu

Dhabis older hospital facilities

have found it a challenge to

attract and retain good people.

In an article published byArab

Finance recently, HAAD chief

executive Zaid Al Siksek admitted

that high turnover of healthcare

professionals was a problem. That

CALLING ALL

DOCTORSBy Shaikha Al Qassimi

Project Partner Laun

Imperi al Col lege London Diabetes Centre Imper ia l Coll ege London, UK 2006

National Reference Lab LabCorp, USA 2009

Tawam Molecular Imaging Centre Johns Hopkins Medicine International, USA 2010

Abu Dhabi Spine Centre Wooridul, South Korea 2010

Cleveland Clinic Abu Dhabi Cleveland Clinic, USA 2011

may start to change now that the

government has invested in new,

state-of-the-art medical facilities.

A third reason why Abu Dhabi

will nd it tough to adequately

staff its healthcare sector, at

least in the short term, is an

unprecedented demand for a

greater quantity and better qualityof healthcare, which is currently

outstripping supply.

In the near future, the

healthcare industry will face great

difculties recruiting and retaining

good, qualied professionals in all

aspects of the industry because

demand exceeds by far what is

available, Taysir Khatib, regional

director of the UAE branch of

the Mayo Clinic the US not-for-

prot medical practice recentlytoldArab Finance.

That demand has been driven

by economic migration to the

emirate, which has led to

a population explosion in 2008,

it was home to 2.3 million people,

compared to 1.4 million in 2001,

according to the Abu Dhabi

Chamber of Commerce and

Industry. Abu Dhabis increasing

economic prosperity, and the

change in lifestyle that brings,

has also led to an increase in the

incidence and range of illnesses

that require treatment. Increases

in type II diabetes, asthma and

obesity are of particular concern.

The government has begun

to shift responsibility for the

healthcare service delivery to

the private sector, allowing

policymakers to focus ondelivering primary care such as

prevention and awareness raising.

As a result, the Abu Dhabi

state-owned company Mubadala

Healthcare has been building

partnerships with international

institutions such as Imperial

College London (ICL). Mubadala

and ICL launched the Imperial

College London Diabetes Centre

in Abu Dhabi in 2006. Mubadala

supplied capital investment,

while ICL manages the facility

maintains clinical standards,

hires and develops staff, and se

medical protocol. The centre,

which specialises in diabetes

treatment, research, training

and education, has treated mo

than 20,000 patients and reach

countless others through publi

health awareness campaigns.

More projects are in the

pipeline (see table). If Abu Dha

can upgrade the skills of its

medical staff in line with its ne

facilities, the healthcare sector w

become an engine of economic

growth in the emirate over the

next two decades.

Healthcare facilities partnerships

There isa demandfor a greatequality of

healthcare


7/31/2019 Issue 1-Eng

10/27

The 19th-century English Romantic poet Percy ByssheShelley memorably called poets the unacknowledged

legislators of the world. A work-shy Bohemian, he clearly

failed to notice that there might be a rival fraternity with

a better claim: entrepreneurs.

Entrepreneurs shape our world, its fashions, its entertainments and

accoutrements, but who acknowledges them? Poets get statues in their

honour (Shelleys huge memorial stands in the quad of University

College, Oxford, under a painted dome). Entrepreneurs are anonymous.

Frances richest man, Bernard Arnault, owns more than 60 well-known

luxury brands including Christian Dior and Louis Vuitton yet he

can walk through any city in the world unnoticed. Sun Microsystems

co-founder Bill Joy developed the internet, Carlos Slim Helu is thesecond richest man in the world and dominates commercial life in his

native Mexico and across South America, while the Ambani brothers

are taking India to rst-world status. But who, aside from business nerds,

would know their names? Can you picture their faces?

The status entrepreneurs ought to be accorded is evident from

their astonishing contribution to society. According to the Global

Entrepreneurship Monitor (GEM), up to 70% of the difference between

national economic growth can be attributed to entrepreneurial activity.

No countries that have high levels of entrepreneurial activity experience

low long-term growth.

Entrepreneurial rms are creative engines, outstripping large

institutions. In the United States, some 67% of inventions and 95%

of radical innovations since the Second World War have come from

small entrepreneurial rms.

Defnitive expression

But even the word entrepreneur is abused. Just as not everyone who can

write is a poet, so not everyone who owns a business can be called an

entrepreneur. A worthwhile distinction can be made between owner-

managers who form a company for tax and legal purposes and the true

tycoon. A global poll by GEM revealed 6.5% of people starting a business


INSIGHT Entrepreneurialism

WEALTHGENERATORSEntrepreneurs rarely win the publics

affection, yet they are the main drivers

of a nations prosperity

By Charles Orton-Jones

IllustrationbyPeterCrowther

7/31/2019 Issue 1-Eng


7/31/2019 Issue 1-Eng



believe they will employ more than 20 workers within ve years, and

a mere 1.7% believe they will employ more than 100 workers. The latter

will account for half of all the jobs created by owner-managers, and

almost 90% of jobs are created by a quarter of owner-managers. Half

of new rms expect to create no jobs at all. It is therefore too generous to

label every hairdressing salon owner, drinks vendor and sole trader as an

entrepreneur. Since only one in nine adults starts a rm, it might be fair

to estimate that only one person in 100 is a true entrepreneur.

But what a difference that person can make. Entrepreneurs tend to

follow up success with more success. Steve

Jobs is known for founding Apple (32,000

employees), but he also founded Hollywoodsfastest-growing lm studio, Pixar. Hermann

Hauser has founded more than 100 rms (he

says hes lost count), including chipmaker ARM

and Acorn, both billion-dollar companies. And

the Greek-Cypriot-born British tycoon Sir

Stelios Haji-Ioannou has founded a shipping

rm, an airline, a hotel chain and two dozen other businesses.

The vital contribution that entrepreneurs make to the wealth of

a nation is obvious. Less apparent is their ability to endow that nation

with social power or soft power. Americas cultural inuence is entirely

due to entrepreneurs. From Ray Krocs McDonalds to Berry Gordys

Motown Records, Uncle Sams ubiquity is the product of pioneeringmen. The government plays no part. The engine of Americas cultural

might is Hollywood, created by mavericks such as Samuel Goldwyn,

Jack Warner, David Geffen and Harvey Weinstein. Australia and Britain

have no such entrepreneurs to boast of, so the children of both nations

watch what the Hollywood studios desire. The Canadian entertainment

industry exists only to distribute American productions. US lm exports

are 10 times larger than its imports. The cultural trafc is one-way.

State of a nation

If the rise of nations is inuenced by entrepreneurs, so is the fall. Swedens

ascent from a poor farming nation to model society is tightly correlated to

the sudden owering of world-class entrepreneurs. From 1890 to 1950,

it was the fastest-growing country in the world. Ruben Rausings Tetra

Pak, Ingvar Kamprads Ikea, Assar Gabrielssons Volvo, Dr Axel Lennart

Wenner-Grens Electrolux and Erling Perssons H&M are just a handful

of the global giants produced by Sweden in the rst half of the 20th

century. The country celebrated fewer new successes in the latter half

of the century. None of the top 50 companies on the Stockholm stock

exchange was founded after 1950. Net job creation since 1950 is negative.

One in ve Swedes of working age is on benets. As a result, the wealth

of the nation has declined.

In 1970, Sweden was the fourth richest nation per head in the wIt is now 17th, behind tiger economies such as Ireland and Singapo

a recent Start-up Day conference in Stockholm, the entrepreneu

blogger Annika Lidne noted: The reection I cant seem to let

from the day had nothing to do with the speakers and all to do wi

audience. Where were all the young Swedish entrepreneurs? Or

more scary, are they an endangered species? Of the 20- to 30-ye

crowd, 80% seemed to be Asian or Middle Eastern or is it that

Swedes still are obediently goaded into big corporation conformity

an adversity to risk or an antipathy towards hard work? I dont

What I do know is that if things dont change soon, Sweden is goin

a second-rate country in a world run by an Indo Chinese joint vent

Swedens entrepreneurs have lost their mojo, but that may be st

to change. In 2006, the right-wing Alliance for Sweden swept to p

pledging to revive the nations appetite for commerce. The current

minister, Fredrik Reinfeldt, comes from a family of entrepreneu

has vowed to change the culture of petty aggression towards w

creators. He says that if Sweden cannot produce more entreprene

will slide into mediocrity.

If Swedens experience tells us anything, it is this entrepre

may not be either celebrated or famous, but they are the true arch

of every nation.

The vital contribution thatentrepreneurs make to the

wealth of a nation is obvious

7/31/2019 Issue 1-Eng

13/27

Just getout of the

way, keeptaxes lowand dontmeddle

THE ART OF

DOING NOTHINGSometimes, a lack of action is the most helpfulthing a government can do By Charles Orton-Jones

How do you encourage

entrepreneurs? Japan offers

subsidised state loans to

start-ups while France uses a

complex system of research and development

tax credits. There is another approach: do

nothing. Just get out of the way, keep taxes low

and dont meddle. This strategy was adopted

by Sir John Cowperthwaite in Hong Kong in

the 1960s with spectacular results.

Cowperthwaite isnt well known. In his

own lifetime he was uncelebrated. But as

nancial secretary of Hong Kong from 1961

to 1971, he transformed the island. His

philosophy was extreme laissez-faire. When a

delegation of businessmen pleaded with him

to fund a tunnel across the harbour, he told

them if it made commercial sense they should

fund it themselves. They did. He kept income

tax at the low rate of 15%. Red tape was

non-existent.

Cowperthwaite instructed civil servants to

collect only the imsiest of statistics, believing

facts would be seized upon and abused by

meddling social engineers.

Cowperthwaite understood the

concept of mission creep. He

worried that as Hong Kong grew in

prosperity, the government would be

tempted to intervene in the lives of

its citizens. He considered

it his job to nip this process in the bud. Large

public projects were funded by land sales

rather than tax rises. Under his keen nancial

scrutiny, Hong Kong became a paradise

of free trade. The results were staggering.

When Cowperthwaite arrived in Hong Kong,

income per capita was an estimated 40%

lower than Gabon. It had no natural resources

and a volatile neighbour. Yet during his t ime

as nancial secretary, real wages rose 50%.

The number of households in poverty fell by

two thirds. Every social indicator improved.

The framework Cowperthwaite created

was carefully maintained by all his successors.

The skyline of skyscrapers, profusion of

multinationals and conspicuous wealth of

modern Hong Kong is now openly credited to

the foresight of this modest civil servant.

Even the Chinese are hailing him. By 1997

it was clear which model was succeeding.

After the British handed Hong Kong back to

the Chinese, it was Beijing, not Hong Kong,

which remodelled its approach to fostering

entrepreneurship. When Cowperthwaite

died in 2006, Hong Kongs chief executive

Donald Tsang said: We shall always

remember Sir John for the pioneering and

dominant role he played in the birth of the

legend of Hong Kong as the freest market

economy in the world.

Today, politicians in ambitious nation state

face a dilemma. Should they offer a helping

hand to businesses or get out of the way?

Cowperthwaite had some advice for them

In the long run, the aggregate of decisions

individual businessmen, exercising individua

judgment in a free economy, even if often

mistaken, is less likely to do harm than the

centralised decisions of a government.

His message to policymakers was

emphatic: do nothing. I did very

little, he said of Hong Kongs

stratospheric rise. All I did was

to try to prevent some of the

things that might undo it.

7/31/2019 Issue 1-Eng

14/27

China Key lesson:manage expansionappropriately, based onproper planningThe stratospheric rise of the Chinese

economy has been underpinnedby the growth of the private sector,

which began when the government

started its economic liberalisation in

the late 1970s.

Many would say that

entrepreneurialism in China goes

back centuries, but in its most recent

form, it dates back about 20 years,

explains Eric Schmidt, founder

and president of the not-for-prot

organisation China Entrepreneurs,

which encourages networkingand sharing of expertise. The

rst businesses were opportunities

tied to the government a friend

who works there would push an

opportunity your way. Then came

private rms in real estate and in the

mid-1990s, entrepreneurs moved

into other opportunities.

Today, Schmidt says the

government is very supportive of

entrepreneurial ventures and is

particularly keen to see the privatesector ourish in rural areas.

The government recognises that

it is a huge part of the economy.

They have set up local investment

funds that operate at a provincial

level. There are also incubation

centres, technology parks and

tax-free zones.

However, the current global

nancial crisis has had an impact

on Chinas entrepreneurs. People

are having to get smarter about how

they develop their businesses. Some

were spending money they didnt

need to, and expanded too quickly.

They had not planned the next

step and are now having to shed

employees quickly. Laying off staff

is not a good thing, says Schmidt.

All economies seek to avoid

such job losses, and it is a lesson

that Dubais real-estate sector is

learning the hard way, with several

developers conrming staff cuts

in the hundreds.



LEARNING

FROM

GLOBAL

LEADERS

From expanding too quickly in

China, to debilitating bureaucracy

in Poland, and accepting failure

in the US, global economies canprovide some useful lessons for

Abu Dhabis entrepreneursBy Bernadette Redern

The reality isthat the US hasalways beendominated byentrepreneurs

US Key lesson: acceptand allow businesses to ailWith its free market economy, the

US has long been considered

a land of opportunity. It is in the

DNA of the country. The reality

is that the US has always been

dominated by entrepreneurs,

explains Dr Michael Morris,

an expert in entrepreneurship

and emerging enterprises from

the Martin J Whitman Schoolof Management at New Yorks

Syracuse University.

According to research by

Robert W Fairlee at the University

of California, 5.94 million new

businesses were launched in the

US in 2007 that equates to

IllustrationsbyJon

Berkeley

7/31/2019 Issue 1-Eng


a new business almost every two

seconds. Dr Morris says the high

level of new start-ups is due in

part to the countrys acceptance of

failure. It is a question of churn

the rate at which ventures failor succeed. It is much more about

having an environment where

rms are strongly encouraged

to enter and exit. The problem

in many other markets is that,

socially, it is much harder to re

people and close businesses.

Dr Shahid Yamin, UAE

Universitys managing director

of the Emirates Center for

Innovation and Entrepreneurship,

agrees this is a lesson Abu Dhabisyoung entrepreneurs could learn.

I tell my students that failure is

only a delayed success, he says.

Other success factors in the

US, says Morris, include minimal

government interference, good

supporting infrastructure, ample

venture capital, angel networks

and support from universities,

although this could be improved.

There is active aggressive

entrepreneurship in businessschools, but the need is to go

much further, says Morris. The

leading-edge schools have it right,

with the top 20 involving students

from across all departments, as

well as teaching entrepreneurship

as an intellectual endeavour.

Poland Key lesson:dont let bureaucracystife innovationIn Eastern Europe, Poland is

considered to be one of the

regions pioneers in terms of

economic reform, following the

fall of state socialism in 1989

and the subsequent passing of

legislation that gave economic

freedom with few restrictions.

In the 1990s, there was an

explosion of entrepreneurs, with

more than two million small

companies launching, says

Kamil Kajetanowicz, an expert at

the Adam Smith Research Centrein Poland, a non-governmental

think-tank that supports the

principle and promotion of free

market economies. Since then,

government has consistently

made life more difcult for

entrepreneurs and passed

hundreds of laws restricting

their activity. It has introduced

more and more requirements

for permits and permissions and

increased bureaucracy.On the bright side, the

government is aware of the

problems and has conducted

a review to identify the stumbling

blocks that prevent private

enterprise from ourishing.

Ministers voted in October 2008

to reduce some of the burden

by removing certain obligations

on businesses. For example,

businesses must keep all evidence

of transactions printed and stored

for ve years, but the quality

of ink used often renders these

receipts illegible after one year,

says Kajetanowicz. The removal

of such obligations could free up

much time for entrepreneurs who,

he says, spend as much as 30%

of their time dealing with these

kinds of legal requirements.

People are hungry for

success and work hard, but the

should be given more chance t

follow their ambitions, he say

UK Key lesson:use popularculture to promoteentrepreneurialismamong young peoplePrivate enterprise has long been

core to the UK economy, but th

government wants to go further

matching the US in terms of

businesses per capita. To this en

ministers published a new strate

in March 2008, outlining plans

for promoting entrepreneurialisthrough ve key areas, one of

which is improving knowledge a

awareness in the education syst

Popular culture is key to

achieving this aim. For examp

one popular TV show

Dragons Den encourages

people who have new business

ideas to pitch their plans to

ve successful entrepreneurs

and ask them to invest in

their proposal. Entrepreneursfrom the programme are now

working with the government

initiatives to help young peopl

learn more about starting thei

own businesses.

One initiative involves one

of the UKs most popular spor

football. Premiership teams a

using their community groups

to promote entrepreneurial

activities. Tutors work with you

people to use football clubs as

case studies, showing them how

the clubs work as businesses,

not just sporting teams. They

then work on challenges such

as developing and marketing

new products or designing new

football strips, while considerin

the nancial imperatives such a

prots and costs.

I tell mystudentsthat ailureis onlya delayedsuccess

7/31/2019 Issue 1-Eng



PRIVATE TUITION

Moving from

a hydrocarbon-

fuelled

economy to

one driven by the privatesector is a key objective for

Abu Dhabis government. With

nite hydrocarbon resources

dominating gross domestic

product (GDP), Abu Dhabi is

only too aware that an over-

reliance on this is not sustainable.

In order that future generations

will inherit a more diverse

economy, numerous initiatives are

under way to boost the private

sector and particularly to createa culture of entrepreneurialism.

It is a known fact that in the

21st century, entrepreneurs are

the cornerstone for the success of

any economy, explains Dr Shahid

Yamin, managing director of the

Emirates Center for Innovation

and Entrepreneurship at UAE

University. We have the land

and the labour and the capital.

We need more innovation, and

the countrys leaders are very well

aware of this and have placed it atthe heart of societal development.

Abu Dhabis private sector

generates 18.2% of GDP (see

chart). According to the Abu

Dhabi Chamber of Commerce,

small to medium-sized enterprises

(SMEs) account for about 85% of

this, equivalent to around $17bn

in 2007 or $18,280 per capita. By

comparison, the US private sector

contributes 88.5%, or $12.2trn,

to the nations GDP, and the USSmall Business Administration

estimates that more than 50%

of this comes from SMEs. That

amounts to $202,564 per capita.

But perhaps more signicantly,

the US job market is driven by

SMEs that represent an incredible

99.7% of all employers; generate

In line with the worlds most entrepreneurial

economies, Abu Dhabi is working hard to

increase private-sector contribution to GDP

By Bernadette Redern

HELPING HAND

According to entrepreneurs in Abu Dhabi, many changes havebeen introduced to support SMEs, including measures to

encourage women and young people to start their own ventures.

Mrs Farida Kamber is the founder and managing director of

architectural and interior design practice Cinmar Design. The

government would like people to play a positive part in building

our economy and society, and long ago, realised women have

an important role. There have been huge changes since I set up

my business in 1989, not just in the infrastructure and buildings

but in the markets and awareness. If I had to start a new business

now, there are a lot more opportunities. Funding is one aspec

and then females were not taken so seriously, but now the UAwoman has proven that she is smart and creative.

Looking ahead, the government has set some challenging

targets for Abu Dhabi when it comes to future private-sector

growth. By 2015, it plans for private sector economic contribu

to have soared to 32% of GDP, mainly driven by new SMEs.

This requires a huge growth spurt in entrepreneurial activity,

but thanks to efforts from a range of government departments

and initiatives such as the Khalifa Fund (see page 17), SME

contributions are on the rise.

up to 80% of all new jobs annually;

and employ more than 40% of all

hi-tech workers (scientists, engineers

and IT professionals). This is

type of growth that Abu Dha

looking to replicate.

88.6

11.4

17 88.5 18

83 11.5 81

GDP(%)

ABU DHABI ABU DUSA USA

2006 2007

GDP: Public/Private sector balance

Public sectorPrivate sector

7/31/2019 Issue 1-Eng


F

rom snack outlets

in malls to air-duct

manufacturingfacilities, a range of

new businesses have been launched

in Abu Dhabi recently, thanks to the

Khalifa Fund. Established in June

2007, the initiative nanced by the

government of Abu Dhabi gives

nancial and advisory support to

locals with small to medium-sized

businesses (SMEs). Our aim is not

just to give nance, but also to take

an integrated approach, explains

chief operating ofcer Dr AhmedAlmutawa. This involves three main

stages. At the rst stage we receive

the applicant and counsel them on

their idea, stage two is the nancing

and the nal stage is developing

and supporting the business,

says Dr Almutawa.

To date, the fund has had

more than 3,000 applications

and supported 154 new ventures.

Recipients of the fund, such as

Mr Abdullah Al Treibeel, say the

nancial aid and the intellectual

support have been invaluable.

Former safety engineer Mr Al

Treibeel opened his air-duct factory

Cirta Electromechanical in

February 2008 but before he could

obtain nancing, the Khalifa Fund

sent him on a one-month training

course: It taught me to write

a business plan, manage cashow

and handle employees, he says.

After the course, he was loanedAED3m to rent a factory and buy

machinery. We now produce

12,000 to 20,000 feet of ducting

per day, and we are planning to

make 50,000 feet. I have AED18m

in forward orders and have made

enough money to repay the loan,

but they have told me to keep

investing in my business for now.

Repayment terms are much

more favourable than conventional

nancing. We work with thebusiness to establish whether it

needs a grace period, which can be

up to two years; the business can

then take up to ve years to repay

the loan at zero to 1% interest,

says Dr Almutawa.

Youth voteSuch support has proved

indispensable, especially to

young entrepreneurs who would

struggle to obtain conventional

nancing. Graduate Mr Hamad Al

Shamisi was in London, working

in marketing for a chain of food

retail outlets called Mr Pretzels,

when he heard about the Khalifa

Fund. He says: I was looking at

newspapers online when I read

about a fund to help SMEs. The

same day, I called them and told

them about my idea for a UAEfranchise of Mr Pretzels. Within a

week Mr Al Shamisi had submitted

a business plan and within two

weeks, the fund had decided to lend

him AED2m. But I said I need

only AED800,000. I managed to

negotiate with the malls to take

payment on a monthly basis, which

enabled me to save capital early.

His rst unit opened at

Abu Dhabis Marina Mall in

September 2007, and he workedthere himself in order to get

the business started. He has

deliberately kept management

costs low so that he can divert

those savings towards expanding

the business a model that has

gained approval from Mr Pretzels

US headquarters. Mr Al Shamisi

now has three operating units and

plans a further 10 in 2009.

The Khalifa Fund itself is also

evolving by branching out intoindustrial investments and setting up

a venture capital fund. The fund is

still in its infancy, but it has matured

quickly and achieved a lot, says

Dr Almutawa.

I can repaythe loan,but theyhave toldme to keep

investing inmy businesor now

BACKING

BUSINESS

DREAMSEntrepreneurs in Abu Dhabi are increasingly

using the AED1bn Khalia Fund, and support

rom its team o experts, to launch new

business ventures By Bernadette Redern

Financing options

Khutwa (step)Micro-fnancing o

up to AED250,000

or home-based

businesses

Bedaya(beginning)Start-up fnance

o up to AED3m

Zeyada (increasGrowth capital or

business expansion

o up to AED5m

1 2

3The Khalia Fund oers applicants a range o fnancingoptions, depending on their stage o development

7/31/2019 Issue 1-Eng

18/27

What started as a specic US problem

sub-prime mortgage borrowers defaulting

on a huge scale in the summer of 2007

rapidly became a national credit disaster

that immediately crossed the Atlantic to plague Europe.

In no time, this became a global credit crunch, and

by September 2008 had metamorphosed into a full-

blown crisis that mortally threatened the worlds biggestnancial institutions and claimed the lives of some, most

spectacularly the US investment bank Lehman Brothers.

The nancial market turmoil took its toll on the real

economy, and advanced countries teetering on the edge

quickly fell over into recession. Emerging markets have

followed a similar downward trajectory in economic

growth, some of which will also fall into recession.

The world is now suffering the worst economic crisis

since the Second World War. The gravity of the problem

was dramatically stated in the nal communiqu issued

by the leaders of the Group of 20 nations (G20) meeting

in London in April: We face the greatest challenge to

the world economy in modern times; a crisis which has

deepened since we last met, which affects the lives of

women, men, and children in every country, and which all

countries must join together to resolve.

The G20 leaders said a global crisis requires a global

solution and outlined their Global Plan for Recovery

and Reform, agreed on at the meeting. But exactly what

caused the crisis that has triggered such a signicant and

coordinated response?


SECTOR FOCUS Financial services

CREDIT CRISIS:

HOW DID WE

GET HERE?The worlds fnancial institutions

are coming together to tackle the

global economic downturn but to

administer the right cure, they need

to understand the causes

By Michael Imeson

IllustrationbyRodC

lark

7/31/2019 Issue 1-Eng


7/31/2019 Issue 1-Eng


SECTOR FOCUS Financial services

There have been countless papers

written and speeches on the causes. One

of the best explanations was given by LordTurner, chairman of the UKs Financial

Services Authority, in The Turner Review: A

Regulatory Response to the Global Banking Crisis,

published in March this year. Speaking before

publication, Turner summarised it thus: At

the core of the crisis was an interplay between

macroeconomic imbalances which have

become particularly prevalent over the last 10-

15 years, and nancial market developments

which have been going on for 30 years but

which accelerated over the last 10 under the

inuence of the macro imbalances.Macro imbalances are the large current

account surpluses that piled up in the oil-

exporting countries, China, Japan and other

east Asian developing nations, and large

current account decits that grew in the US,

UK, Ireland, Spain and elsewhere. Many of

these took the form of central bank reserves

invested in government bonds or government-

guaranteed bonds, and this in turn drove

interest rates down to historically low levels.

Low interest rates have had two effects.

First, they have helped drive rapid growth ofcredit extension in some developed countries,

particularly in the US and the UK and

particularly, but not exclusively, for residential

mortgages, said Turner. This growth in credit

was accompanied by a degradation of credit

standards, and it fuelled property price booms,

which for a time made those lower credit

standards appear costless.

And second, they had driven among

investors a ferocious search for yield a desire

among any investor who wishes to invest in

bond-like instruments to gain as much as

possible spread above the risk-free rate, to

offset at least partially the declining risk-free

rate, he said.

Developments in the nancial markets

were the other main cause. The macro

economic imbalances stimulated demands

that were met by a wave of nancial

innovation, focused on the origination,

packaging, trading and distribution of

Low interest rates drove thegrowth of credit extensionand a search for yield

securitised credit instruments. There

was explosive growth in both scale and

complexity of these instruments and also

a related explosion in the volume of credit

derivatives to enable investors and traders

to hedge underlying credit exposures, or to

create synthetic credit exposures.

Less risk averseThis growth was driven by (and itself drove)

big increases in major nancial institutions

borrowing. Market participants got locked into

a cycle of increasing irrational exuberance

THE G20S GLOBAL PLAN

Restoring growth and jobs: this entailsan unprecedented and concerted fscal

expansion, according to the G20s fnal

communiqu, which will create or save

millions o jobs and which, by the end o

next year, will amount to $5trn, and raise

output by 4%.

Strengthening fnancial supervision

and regulation: a stronger, more globally

consistent supervisory and regulatory

ramework or the fnancial sector will be

built. The 10-year-old Financial Stability

Forum, comprising international and

national regulators and supervisors, willbe replaced by the new Financial Stability

Board (FSB). The FSB will have a much

wider membership and will collaborate

with the IMF to provide early warning o

macroeconomic and fnancial risks and

the actions needed to address them.

Strengthening global fnancial

institutions: the G20 governments will

make available an extra $850bn throu

bodies such as the International MoneFund, the World Bank and multilateral

development banks to support growt

developing countries.

Resisting protectionism and promo

global trade and investment: this inclu

a promise rom governments not to ra

new trade or investment barriers or

implement measures that run counter

World Trade Organisation rules.

Ensuring a air and sustainable

recovery or all: the signatories to the

plan reafrmed their commitment to

meeting the Millennium DevelopmentGoals and to achieving their pledges o

overseas development aid. They also

said that slower economic growth or

recession would not derail their eort

to address the threat o irreversible

climate change or reach an agreemen

at the UN Climate Change conerence

Copenhagen this December.

and decreasing risk aversion. Spreads on

securities and loans fell to inadequate lev

pushing up the value of assets on books o

banks, hedge funds and other organisatio

fuelling in turn higher apparent prots a

higher bonuses.

This carried on until we reached the

where people began to fear that the musi

about to stop, but where others felt tha

had to keep dancing till the band stopped

which it did in summer and autumn 200

Irrational boom then turned to bust, crea

a crisis which has been as bad as any sin

7/31/2019 Issue 1-Eng

21/27

best illustrates the collective steps being taken to stabilise

the world economy, restore growth, save jobs, reshape the

nancial system and preserve free trade (see The G20s

global plan opposite).

What happens next?The G20 will meet again before the end of the year to

review progress on its plan. G20 nance ministers willconvene in Scotland in November to discuss progress

on the nancial regulatory and supervisory aspects of

the plan. The Financial Stability Board (successor to the

Financial Stability Forum), the IMF, the Basel Committee

and other supranational bodies are all hard at work

implementing their own recommendations.

Meanwhile, the nancial industry itself is adopting new

principles of conduct and best practices on critical issues

such as risk management, pay and bonuses, asset valuation,

liquidity management and credit rating.

The IMFs World Economic Outlook: Crisis and Recovery,

published in April, says the global economy is in a severerecession inicted by a massive nancial crisis and acute

loss of condence and estimates that world output is

projected to decline by 1.3% in 2009.

But the worst could soon be over. The IMF forecasts

the rate of contraction should moderate from the second

quarter onward and world output should recover gradually

in 2010, by 1.9%. That optimistic outcome depends

on whether the measures outlined above are effective.

Meanwhile, the worlds nancial institutions, businesses,

governments and public sector entities must knuckle down,

follow the programme and hope for the best.


the stock market crashes of 1929 and the various banking

crises that followed, Turner added. As a result, banking

systems in many countries are suffering from an impaired

ability to play their vital role in credit extension to the real

economy and a process of de-leveraging threatens severe

adverse effects on real economic prospects.

The global response

The response to the nancial crisis and economicdownturn has been fairly swift and uncharacteristically

coordinated. National governments, central banks

and nancial regulators along with supranational

institutions such as the International Monetary Fund

(IMF), Organisation for Economic Co-operation and

Development, Financial Stability Forum, the Basel

Committee on Banking Supervision at the Bank for

International Settlements and the European Commission

have all published reports analysing the problems

and recommending how to solve them and reduce the

likelihood of similar occurrences in future.

Private sector organisations have done likewise. Bodies

such as the Institute of International Finance (IIF), the

Counterparty Risk Management Policy Group, the British

Bankers Association, American Bankers Association, the

Alternative Investment Management Association and the

International Capital Markets Association have all said

who and what they think is to blame for the mess and how

they should cooperate with national and international

authorities to clean it up and prevent its reoccurrence.

The programme of action agreed by the G20 in April

THE REACTION IN THE GULF

Economic growth in the oil-rich Gul Co-operation Council (GCC) countrie

Saudi Arabia, United Arab Emirates (UAE), Kuwait, Bahrain, Oman and

Qatar will slow this year as a result o the global economic downturn.

But i oil prices remain above $45 a barrel, recession is unlikely in

the region. Simon Williams, an economist at HSBC Middle East, says the

region is well placed to weather the impact o this abrupt downturn.

The immense surpluses the region has run over the past fve years now

oer the Gul room to manoeuvre, which should ensure that stability is

maintained, the banking sector is protected and debt obligations continu

to be met.

The Economic Vision 2030, launched last year by the Abu Dhabi

government, aims to diversiy the economy away rom oil toward

knowledge-based industries.

DPE chairman Nasser Ahmed Al Suwaidi, Chairman o Abu Dhabis

Department o Planning and Economy, said earlier this year that Abu

Dhabi was fnancially strong enough to continue implementing Vision 2030

despite the downturn. Even i it missed an annual growth target during

a difcult year, it would not aect the long-term objectives o economic

growth and diversifcation, he said. In any year o good growth, Abu

Dhabi will easily exceed the set annual growth target.

7/31/2019 Issue 1-Eng

22/27

ADCEDTeeing Abu Dhabi up for success

Photo

graphybyKerbe.co.u

k

7/31/2019 Issue 1-Eng

23/27

The launch of the

worlds rst zero-

carbon, zero-waste

and car-free city in

Abu Dhabi one of the worlds

largest oil producers caught

everyone by surprise. But the

emirates government says this

major investment in green energy

not only demonstrates Abu

Dhabis commitment to economic

and energy diversication, but

also shows a strong determination

to lead the global agenda on

sustainable development.

Masdar City, a six square-

kilometre energy, science and

technology development due for

completion in 2010, has been

described as an integrated green

community. Located in the heart

of Abu Dhabi, the government-

backed development will house

50,000 people close to their work,

schools and hospitals.

The green citys downstream opportunities

will beneft many thousands o people

living in Abu Dhabi By Abeya Mokhtar


DEBRIEF Masda

LIVING THE

GOOD LIFE

The projects planners believe

its success rests on the fact that the

city has been designed around the

lifestyles of its future inhabitants.

We are creating a city where

residents and commuters will live

the highest quality of life with the

lowest environmental footprint,

Dr Sultan Al Jaber, the CEO of

Masdar the organisation behind

the project recently said.

While the city will house

a limited number of people,

planners say a ripple effect will

affect thousands more living in

Abu Dhabi. Urban planning

experts have spoken of the

potential Silicon Valley effects

of the development and the

downstream opportunities it

will bring. The project is expected

to take the populations skills

to a new level, creating jobs in

education, research and other

areas; to attract companies

pursuing new technologies; and

to trigger a rise in ecotourism.

Global investment in

alternative energy exceeded

$100bn in 2007, according to

theRenewable Global Status Report

2007from REN21, a renewable

energy policy network. Masdar

City is just one government

initiative designed to attract some

of this investment.

Projected total investment in

the citys infrastructure is $22bn,

and a further $15bn will be

poured into renewable energy

projects. Masdar ofcials say this

investment is expected to yield

medium- and long-term returns

for Abu Dhabis economy. The

development is expected to save

more than $2bn in oil over the

next 25 years. It will also create

more than 70,000 jobs and

increase Abu Dhabis annual G

by 2%, according to Masdar.

Keen to maximise the retur

on its investment, the governm

is offering incentives to set up in

Masdar City. Besides a tax-free

environment, investors have be

offered 100% foreign ownershi

intellectual property protection

and proximity to manufacturer

suppliers and markets.

The government is hoping

such incentives will attract more

names such as MIT, GE and th

Tokyo Institute of Technology,

all of which are taking part in

the project. Global collaborativ

networks are crucial to the succ

of projects such as Masdar City

and sustaining an environment

that attracts the best partners an

experts in alternative energy wi

remain a great challenge.

Main picture and below:

Masdar City has been designed

around its citizens liestyles

7/31/2019 Issue 1-Eng


DATA BANK Abu Dhabi economic indicators

RUNNING

THE NUMBERSThe Abu Dhabi governments drive towards

economic diversifcation is starting to

deliver results, as are its eorts to attract

greater levels o oreign direct investment

Country 2006 2007 Estimates

start ater

Abu Dhabi 52.8 55.6 2007

Canada 39.3 43.7 2007

Ireland 52.5 60.2 2007

Luxembourg 89.9 103.1 2007

New Zealand 25.2 30.4 2006

Norway 72.7 83.5 2006

Oman 14.0 15.7 2007

Qatar 67.9 78.8 2007

Saudi Arabia 15.0 15.7 2007

Singapore 31.0 35.2 2006

United Arab Emirates 38.8 42.5 2007

GDP per capita (current prices in $, 000s)

The policy o economic

diversifcation and eortsto encourage industriesand manuacturing havepaid strong dividendsHE Sultan Bin Saeed Al Mansouri, UAE Minister o Economy

2001 2007 (estimate)

Agriculture, livestock

and fshing5,988 4,366.9

Crude oil and natural gas 66,123 241,100.0

Quarrying 115 160.0

Manuacturing industries 18,549 41,528.8

Electricity, gas and water 2,679 6,296.3

Construction 8,720 20,069.8

Wholesale retail trade

and repairing services7,283 14,895.1

Restaurants and hotels 1,439 2,958.3

Transports, storage and

communication6,231 11,324.8

Real estate and business

services7,413 15,800.0

Social and personalservices

2,137 4,823.2

The fnancial

corporations sector7,008 22,018.0

Government services

sector16,129 18,536.3

Domestic services

o households790 978.5

Less imputed bank services 2,166 4,808.0

Total 148,437.6 400,047.466

Gross fxed ormation by sector (AEDm) 2007(estimate)Agriculture, livestock and fshing 665

Crude oil and natural gas 9,613

Quarrying 50

Manuacturing industries 12,212

Electricity, gas and water 4803

Construction 3519

Wholesale retail trade and repairing services 2299

Restaurants and hotels 3774

Transports, storage and communication 6639

Real estate and business services 8947

Social and personal services 2330

Financial corporations sector 848

Government services sector 2086

Source: Statistical Bureau, Abu Dhabi

Source: Department o Planning and Economy, Abu DhabiSources: Abu Dhabi Chamber o Commerce, IMF, World Economic Outlook Database

Growth in GDP by sector (AEDm)

7/31/2019 Issue 1-Eng

25/27THE ECONOMIC REVIEW SUMMER 200

FDI 2005 FDI 2006

Mining 251 273

Manuacturing 2,589 2,685

Electricity and water 1,268 1,479

Construction 3,365 3,405

Whole and retail sales -51 228

Transportation and communication 765 1,196

Financial intermediation 7,039 6,718

Other 204 188

Total 15,430 16,171

Total FDI in the emirate o Abu Dhabi, by economicsector (2005-2006) (AEDm)

2005 (census year) 2007 (estimated)

Agriculture, livestock and fshing 93,395 90,097

Mining and quarrying 23,714 24,788

Manuacturing industries 63,102 75,985

Electricity, gas and water 13,564 13,686

Construction 184,292 266,371

Wholesale retail trade and repairing services 134,470 148,969

Restaurants and hotels 28,418 31,173

Transport, storage and communication 44,891 50,564

Real estate and business services 23,962 30,560

Social and personal services 42,543 44,697

Financial corporation sector 10,063 12,167

Government services 114,851 115,023

Abu Dhabi employment fgures: sector breakdown



Employment by gender(census 2005)

Male 614,770

Female 99,238

Employment by nationality

(census 2005)

Other Arab 124,489

Asian (non Arab) 486,4

Nationals 75,519

GCC 6,924

Western 9,171

Others 11,446

Abu Dhabis fnancial district:home to one o the emirates

astest-growing sectors

7/31/2019 Issue 1-Eng

26/27

What is your vision for the Abu

Dhabi Performing Arts Centre?

The centre is designed to cater

for many events at the same time

it can host a musical, opera,theatre, experimental theatre

and concerts that coincide with

conferences. I see such centres

as gathering places for people of

all cultures and ages, presenting

an ever-changing menu of visual

and performing art that feeds the

cultural vitality of the city.What was your inspiration

for the design?

The idea was of an objectconnecting throughout the city,

almost like an umbilical cord.

There is this series of what they

call pearls at the edge the

idea for us was that the pearl was

almost on a string, like a pendant.

The project is interesting in the

context of Abu Dhabis urbanism,

because it looks as if it almost had

the density of a city, but actually

its a single building.

From an architects view, what

for you is the lure of this part

of the world?

Our projects in the Gulf are

offering the most boundless and

therefore the most challenging

opportunities to develop and test

our design repertoire, intelligence

and creativity. Its the scale of the


IN CONVERSATION Zaha Hadid

work that is only possible here;

there is a real spirit of innovation

and creativity in the air.

What is the importanceof architecture to society?

I think through architecture you

have to give people a glimpse

of another world, and make

them excited about ideas. The

connection between culture and

public life is critical. I believe

cities that can shake off their

inherited aesthetic regimes and

dare to adopt a contemporary

urbanism and architecture will be

the places where the next, mostadvanced sectors of the economy

will ourish.The cultural district is part

of the governments 25-year

plan. What are the merits

of this approach?

A cohesive masterplan helps

fast-growing cities like Abu

Dhabi avoid the market-driven,

patchwork urbanism that can arise

in rapidly emerging metropolises,

relying on one building typology

only the high-rise tower. With

such a forward-thinking plan, Abu

Dhabi has learned that a citys

development cannot be steered

simply by market economy, and

that a sustainable vision for the

future has to embody the wider

aspects of urban life. This process

needs to be initiated, monitored

and guided and, of course,

include a cohesive strategy for

culture and the arts.Which challenges should urban

planners be aware of whenimplementing long-term plans?

In the digital 21st century, with

peoples lives becoming more

exible and globalised, we have to

deal with social diagrams that are

so much more complex, compared

with those of the industrial 20th

century. This requires a new

architecture of uidity. In our own

ofce, weve learned to apply new

techniques to urbanism, where

elements t together to form a

continuum. With these techniques,

we can do something radically

different than what we saw at

the beginning of the century,

when buildings were oriented in

disconnecting chaos. We look a lot

at Natures systems when we try

to create environments at her

coherence and beauty.

Abu Dhabhas learned

a sustainabvision hasto embodythe wideraspects ourban lie

IllustrationbyMarkDickson,

sourcephotogra

phybySteveDouble

ZAHAS PEARLS

OF WISDOMWorld-renowned architect Zaha Hadid talks to The

Economic Reviewabout designing the arts centre on

Saadiyat Island, Abu Dhabis new cultural district

7/31/2019 Issue 1-Eng

27/27

The Economic Reviewis the newsletter o

theAbu Dhabi Council for Economic Development.

The Abu Dhabi Council or Economic Development

is a statutory body, established in May 2006,

to acilitate economic diversifcation and

growth through creating greater understanding,

cooperation and engagement between the

public and private sectors o the emirate o Abu Dhabi.

ADCED

PO Box 44484Abu Dhabi

UAE

T: + 971 2 418 9999

F: + 971 2 418 9988

E: [email protected]

Published by Bladonmore

Editor: Eila Rana

Managing editor: Sean Kearns

Sub-editor: Lynne Densham

Art director: Owen Thomas

Production manager:Andrew Miller

Publisher: Jonty Summers

Senior account manager: Julian DanielsDirectors: David Ladds, Richard Rivlin

T: + 44 207 631 1155

E: [email protected]

W: www.bladonmore.com

issue 1-eng

Documents