THE UAE ECONOMY TRANSFORMED UNDER SHEIKH KHALIFA’S LEADERSHIP
▶ During his presidency, the country’s non-oil economy has grown and it has evolved into a regional economic powerhouse, writes
Sheikh Khalifa, who died on Friday at the age of 73, presided over the UAE’s transformation into a progressive economy. Diversifying the UAE economy to boost non-oil revenue, developing it into a regional and global financial and tourism hub with best-in-class infrastructure and transport networks and promoting the growth of a business-friendly environment were among the many milestones achieved by Sheikh Khalifa.
The Emirates opened up property sales to foreign investors and built an ecosystem for small and medium-sized enterprises under his watch.
After succeeding the UAE Founding Father, the late Sheikh Zayed bin Sultan Al Nahyan, as President in November 2004, Sheikh Khalifa brought his long experience at senior levels of leadership to chart the modernisation of the country and ensure its continued economic relevance both within the region and beyond.
“Sheikh Khalifa is recognised for bringing the UAE, a modest desert sheikhdom of seven emirates, to international fame and guiding the country through challenging times,” said Vijay Valecha, chief investment officer of Dubai-based Century Financial.
“He spearheaded the expansion of healthcare, education and technology sectors on regional and global scales as well as secondary sectors, which have effectively promoted the country’s economic diversity.”
Sheikh Khalifa was responsible for steering the development of the oil and gas sector that has contributed to the country’s economic diversification. He also prioritised renewable energies and redirected the UAE’s growth trajectory towards a future where hydrocarbons will no longer be the mainstay of the economy.
“Under his leadership, the UAE has become the most diversified economy in the GCC,” said M R Raghu, chief executive of research company Marmore Mena Intelligence.
“The UAE has the highest contribution of non-oil revenue as a percentage of total government revenue compared with other major oil-exporting countries in the region.”
Opec’s third-largest producer, the UAE is turning to renewables as an alternative energy source and growing into a world leader in developing hydrogen.
Under Sheikh Khalifa’s leadership, the UAE also achieved success internationally, one highlight being the decision in 2009 to host the headquarters of the International Renewable Energy Agency in Abu Dhabi.
Sheikh Khalifa’s decree in December 2009 establishing the Emirates Nuclear Energy Corporation as the entity in charge of carrying out the UAE’s nuclear programme represents another milestone for the country. Last year, commercial operations began at Barakah Nuclear Energy Plant.
The establishment of the renewable energy company, Masdar, in Abu Dhabi in 2006, paved the way for the building of solar power plants, further diversifying the energy mix. And last year, the UAE became the first Middle East country to announce a net-zero by 2050 strategy as the country committed to supporting international efforts on global warming.
Under Sheikh Khalifa’s leadership, a clear vision for the future helped to drive forward the Abu Dhabi Investment Authority, one of the nation’s sovereign wealth funds. Adaptable policy frameworks, regulatory changes and a flexible business and corporate environment have underpinned the country’s progress and propelled it to become the Arab world’s second-largest economy.
As part of Sheikh Khalifa’s vision to attract business, the UAE introduced its first free zone in the 1980s, offering investors 100 per cent ownership of their organisations and favourable tax conditions. Today, there are more than 50 free zones across the Emirates.
The UAE is also home to world-leading financial and commodities hubs. Today, the Dubai International Financial Centre and Abu Dhabi Global Market are home to some of the world’s largest banks, investment houses, insurers, asset managers, cryptocurrency exchanges and a host of technology-focused start-ups, disrupting sectors from financial services to health and education. Dubai Multi Commodities Centre, one of the world’s fastest-growing commodities hubs, hosts companies that deal in everything from tea and coffee to rough diamonds and currency futures.
These free zones have put the UAE on the global map and helped boost foreign direct investment flows to the country.
The local aviation industry’s development over the decades has transformed the nation from a fishing and pearl-diving spot into a global centre for air transport. It has developed into a global powerhouse for air connectivity and created best-in-class airlines such as Emirates, Etihad, Flydubai and Air Arabia.
Under Sheikh Khalifa’s leadership, the UAE aviation industry grew into a key pillar of the economy and a driver of business activity, contributing about 13 per cent of national gross domestic product. It is now home to six national airlines ranging from low-cost to full-service operators.
Open skies policies, large investments in infrastructure and a foreign investor-friendly business environment have spurred the development of the aviation industry under his leadership.
The UAE has also become part of the aerospace supply chain, rather than only a customer of billion-dollar aircraft orders placed with the world’s biggest plane makers. Strata, Mubadala Investment Company’s aerospace manufacturing unit, became the Arabian Gulf’s first producer of composite aircraft parts and is a key part of the UAE’s economic diversification and local industrialisation plan.
Etihad Rail, which aims to connect the UAE with the rest of the GCC, is another key infrastructure project under development. Stage one is complete and operating along a 264-kilometre route from Shah and Habshan to Ruwais, transporting sulphur.
The Emirates is also a world-leading tourist destination, with many projects introduced to attract both business and leisure visitors.
The industry is a leading contributor to the country’s gross domestic product and also acts as a catalyst for the growth of the retail sector.
The UAE’s Mice (meetings, incentives, conferences, and events) industry enables it to host international business conferences and exhibitions throughout the year. Most recently, the country successfully organised Expo 2020 Dubai. It is set to host the 28th UN global climate change talks in 2023.
In the UAE, the decision in 2005 to permit the sale of freehold properties and 99-year leases in certain areas was also a game-changer. The sector is now one of the leading contributors to the UAE’s non-oil economy and attracts significant global investment.
Despite the pandemic shock in 2020 that sent the world into its deepest recession since the 1930s, the UAE economy bounced back and is forecast by the Central Bank of the UAE to grow 4.2 per cent this year.
After expanding the size of its economy to about Dh1.5 trillion from Dh11 billion ($3bn) in 1973, the country now plans to double its economic output over the coming decade to Dh3tn.
In March, the UAE announced plans to increase the manufacturing sector’s contribution to GDP to Dh300bn over the next decade as it embarks on a national programme to boost output.
The “Operation 300bn” strategy is focused on expanding the UAE’s advanced manufacturing base in sectors including energy, petrochemicals, plastics, metals and green fuels. Building partnerships with global industrial champions and boosting FDI is part of the broader industrial growth plan.
Rules allowing full foreign ownership of onshore companies came into effect in June last year. Changes to the commercial company ownership laws, which were first announced in November 2020, removed the requirement for onshore companies to have a major UAE shareholder.
In November, the UAE amended laws regarding the decriminalisation of bounced cheques.
The UAE also launched Golden Visas and a path to citizenship for talented individuals who have made outstanding contributions to the country, as well as those who have highly-prized skills or work in key industries that are crucial to economic growth.
“The period of phenomenal growth had a need for legal reforms in the country,” said Devanand Mahadeva, director of Bestwins Law Corporation.
“The most important legal developments have revolved around making the UAE more tolerant, such as with the reforms on personal status laws, labour laws, foreign business ownership, tax laws and cyber laws to meet the demands of the modern world.”
Earlier this week, an unemployment insurance programme for Emirati and foreign workers was announced for the private and public sectors.
The UAE also launched the Virtual Assets Regulatory Authority in March that aims to create an advanced legal framework to protect investors and provide international standards for virtual asset industry governance to enable responsible business growth.
The country has created various business incubators to nurture start-ups, offering funding and mentorship, as it seeks to spur innovation and attract skilled talent.
The UAE made it mandatory for all listed companies to have at least one female director on their boards last year as it seeks to boost female participation in the workforce. The Emirates already has the highest level of women participating in the workforce – at 57.5 per cent in 2020 – of any country in the Mena region, the World Bank said last year.
Sheikh Khalifa also focused on developing a knowledge-based digital economy, driven by data analytics and artificial intelligence (AI). The UAE is developing a super computer and aims to train 100,000 coders as part of efforts to boost its knowledge-based economy.
The UAE’s road map for the next 50 years of development and economic growth focuses on new technologies, the Fourth Industrial Revolution and artificial intelligence. More importantly, the road map also looks to develop renewables and clean energy; oil, petrochemical and mining industries; and land and sea transport and storage sectors.
Sheikh Khalifa charted the modernisation of the country and ensured its continued economic relevance