ECONOMY
Dubai: The Abu Dhabi Government has announced Dh50 billion stimulus package to support the economic growth, following a strong recovery in public finances of the emirate supported by higher oil prices and improved fiscal position.
The emirate’s decision to inject more money into the economy through higher spending, waiver of certain fees and terms of licencing has come at a time when the non-oil private sector growth is poised to play big role in the economic growth from this year.
Analysts say relatively low government debt combined with substantial resources at the emirate’s disposal makes it possible for the Abu Dhabi government to inject funds into to the economy to support the non-oil economy.
Abu Dhabi recorded large fiscal surpluses averaging 13 per cent of gross domestic product (GDP) over the five years leading up to the 2014-15 oil price slump, according to rating agency Moody’s. However, the emirate’s revenue dropped rapidly in 2015 and 2016, pushing budget balances in to negative territory.
- Jamal S Al Daheri | CEO of Senaat
Analysts said improved fiscal position supported by higher oil prices, fiscal consolidation measures such as lower government spending during the last two years and improved government revenues through the implementation of value-added tax (VAT) have prepared the government to increase spending.
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“The emirate is recovering gradually, and we forecast Abu Dhabi’s fiscal position to return to balance by 2019,” said Thaddeus Best, an analyst Moody’s, in a recent note. “The rise in oil prices and spending controls are the main drivers behind the narrowing deficit,” he said.
According the latest International Monetary Fund (IMF) data, Abu Dhabi’s real GDP growth is expected to gain momentum this year, largely driven by non-oil sector growth. The emirate’s real GDP growth, according to the IMF was -1.6 per cent last year and is projected to grow at 0.5 per cent and 2.6 per cent respectively in 2018 and 2019.
Indicating slower growth from oil sector impacting the overall GDP growth, the IMF data showed that Abu Dhabi’s oil GDP grew -2.4 per cent last year with flat growth ahead for 2018 and 2.4 for per cent growth in 2019.
According to Moody’s, government assets are substantial and concentrated in Abu Dhabi Offshore assets, starting with the emirate’s sovereign wealth fund, the Abu Dhabi Investment Authority (Adia). Adia itself does not disclose its asset size or composition. The Institute of International Finance estimates Adia’s total assets at $577 billion (equivalent to 155 per cent of the UAE’s 2017 GDP or more than five years of general government expenditure) as of end 2017. The Sovereign Wealth Fund Institute (SWFI) has a higher estimate at $828 billion.
- Mohammad Jameel Al Ramahi | CEO of Masdar
Improving government finances are reflected in the spending pattern and project awards. According to data from Meed Projects and Abu Dhabi Commercial Bank (ADCB) on project awards in the GCC for the first quarter of 2018, the value of UAE projects awarded remained solid and markedly above the two-year average in the first quarter of 2018. Total awards in value terms were up 29.5 per cent year on year in the first quarter with both Abu Dhabi (up 97.3 per cent) and Dubai (up 7.8 per cent) seeing a solid increase.
Economists said fiscal consolidation measures implemented during the last two years and the recent rise in oil prices to more than $60 per barrel have given ample fiscal space for the government to ease its purse strings to stimulate growth.
“We expect the UAE’s non-oil growth to pick up to 2.7 per cent in 2018 and 3 per cent in 2019, driven by private consumption and non-oil exports, as fiscal consolidation eases and global trade improves,” said Garbis Iradian, Chief Economist, Mena, the Institute of International Finance (IIF).
10 economic initiatives to boost Abu Dhabi’s private sector
His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces and Chairman of Abu Dhabi Executive Council, has approved a Dh50 billion economic stimulus package for Abu Dhabi, aimed at accelerating its growth over the next three years. Aimed at boosting the competitiveness of Abu Dhabi's private sector, the plan comprises a set of 10 initiatives, covering infrastructure and legislative projects, as well as SMEs, the industry and social projects. Here is a look at each of them:
DEVELOPING LOCAL ECONOMY AND THE JOB MARKET
1 Issuing partnership policies between the private and public sectors and to launch the Šrest group of projects to activate the cooperation between the sectors by the end of this year.
2 Creating at least 10,000 jobs for Emiratis in the private and public sectors over the next Šfive years.
3 Encouraging and organising local production and supporting SMEs to boost their competitiveness locally and regionally.
4 Issuing dual licenses for companies in Abu Dhabi free zones to allow them to work outside the free zones and to participate in government tenders.
BOOSTING BUSINESS PRACTICES
5 Exempting all new licenses from having a physical work space in the emirate for two years, and permitting permanent home licenses.
6 Implementing instant licensing systems in most commercial license types and for all services provided by the government
7 Speeding up the settlement of due payments on contracts for suppliers from the private sector, and to review all Šnes for the healthcare, education and municipal affairs sectors; a special committee, headed by the Executive O’ffce and the Department of Finance, will oversee all relevant procedures
8 Reviewing building regulations for infrastructure, residential properties, commercial and industrial sectors, with an aim to reduce the costs for Emiratis, residents and investors as well as support the urban development of Abu Dhabi.
UNLOCKING NEW OPPORTUNITIES
9 Establishing the Abu Dhabi Accelerators and Advanced Industries Council or “Ghadan,” which is Arabic for tomorrow; the council will work to attract and support value-added investments and technologies that would lead the development of Abu Dhabi's economy.
10 Developing eco-tourism facilities for both nautical and mainland programmes in the emirate, including setting up camping villages and recreational sports areas.
NON-OIL ECONOMIC ACTIVITY SET TO DRIVE GROWTH IN 2018
Private developers and investors get a mega-sized Abu Dhabi stimulus
Stimulus package specifically addresses their concerns such as real estate related costs
By Manoj Nair Associate Editor
PROPERTY
Dubai: Get private developers back into the game — if Abu Dhabi’s whopping Dh50 billion stimulus package achieves that, it would be just the boost its property market needs.
For too long now, the real estate sector in the emirate had been reliant on government-owned developers and those associated with financial institutions were doing much of the hard yards. That could finally change.
The stimulus package specifically states that there will be a full-on “review of building regulations for infrastructure, residential properties, commercial and industrial sectors,” the Government had said in a statement on plans for the real estate sector. This, it added, would “help reduce costs for citizens, residents and investors”.
- Dr Obaid Al Za’abi | CEO of SCA
According to Vaibhav Sharma, Chief Strategy Officer at MPM Properties and part of the Abu Dhabi Islamic Bank, “We are aware of multiple small- to mid-sized developers who have shown interest in exploring opportunities to develop projects in Abu Dhabi. This [the stimulus] will go a long way in encouraging them to proceed with their projects. These will now have better demand visibility.”
The wording of the announcement on cost to “residents” is particularly significant. This could be the signal to the real estate sector for specific solutions that address the need for more affordable housing in the emirate. Sharma calls it as helping with a “market-aligned approach”.
“A fair number of residents have been adopting a cautious approach in recent months, and this will encourage them to invest in Abu Dhabi real estate, which offers annual returns of 7-8 per cent net,” said Sharma.
Market sources say businesses holding land could now be induced to put this to good use. So much of development activity has centred in and around the main island, and this could now be pushed outwards to take in more regions.
Alliance between Aldar and Emaar
This is the third major real estate focused initiative Abu Dhabi’s real estate sector has been witness to since the start of the year. First was the announcement of an alliance between Aldar and Emaar to jointly develop projects in Abu Dhabi and Dubai, with a figure of Dh30 billion mentioned in the initial phase.
Then came Aldar’s acquisition of land held by TDIC, including sizeable parcels on Saadiyat Island. This deal was pegged at Dh3.7 billion.
The Dh50 billion stimulus is also in line with federal level announcements made just recently.
- Mohammad Khalifa Al Mubarak | Chairman of the Department of Culture and Tourism-Abu Dhabi
According to Prasanth Manghat, CEO and Executive Director of NMC Health, “The timing is significant as it comes within few weeks of the new visa and foreign ownership rules. The [latest] plan promises to cover infrastructure, SMEs, industrial and social projects. Real estate stands to benefit immensely.”
The ecotourism plans — another part of the stimulus strategy — “shall surely offer a large-scale development of land holdings and again giving a major boost to the real estate.”
It will also be interesting to see how another component of the stimulus will impact on the property market.
All new commercial licences issued by the emirate exempts businesses from having to invest or lease offices. The exemption applies for a two-year term and the business owners can operate through “permanent home licences”.
Fines to be reviewed within health care, education and municipal sectors
Municipality says it already set in place a five-year plan for the development of its urban ‘cities’
By Samihah Zaman, Staff Reporter
SOCIAL SECTORS
Abu Dhabi: As part of the Abu Dhabi economic stimulus plan, His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, directed that all fines be reviewed within the emirate’s health care, education and municipal sectors. An executive committee will be tasked with all relevant procedures. Officials expect that these reviews will boost existing projects.
- Abdullah Kalban | CEO of EGA
Saif Al Qubaisi, director general at the Abu Dhabi City Municipality, told reporters that the Municipality has already set in place a five-year plan for the development of its urban “cities”, including Mohammad Bin Zayed City, Khalifa City and Shakhbout City, and projects in these areas will be supported by means of the economic package. Infrastructure development in Shakhbout City will include the construction and enhancement of internal roads, parking facilities and street lighting. Playgrounds will also be established, and eight gardens and 21 parks will be built at a cost more than Dh200 million.
Across in Khalifa City, a road network and another drainage system will be established, along with additional street lighting and pavements. Another set of projects will enhance the road and sewage network in Mohammad Bin Zayed City, as well as set up speedbreakers and road signage and lighting. A set of 154 residential plots will also be served be six more kilometres of roads, parking lots and sidewalks.
