More on sovereign wealth funds
A PROJECT IS under way to turn a quiet little town into one of the world’s most famous capital cities.
Sitting atop immense oil and capital reserves, Abu Dhabi is already cementing its position as a financial powerhouse. Its recent $7.5 billion lifeline to Citi demonstrated that.
With huge financial muscle behind it, Abu Dhabi is no longer content to play the sleepy neighbour to Dubai. Nor is it content to quietly invest and reinvest abroad in small stakes of equity, real estate and debt. It wants to concentrate more on putting its resources to use at home; and it wants others to help it do so.
"In America, when you say you’re from Abu Dhabi, almost nobody has heard of it," says an Abu Dhabi businessman. "But when you say you’re from somewhere near to Dubai, people’s faces light up."
Envy and admiration of Dubai’s status are important forces behind the will to make Abu Dhabi city, in its government’s words, a "great world metropolis".
But the chaos Dubai has thrown up with its real estate development has also convinced the rulers of Abu Dhabi to adopt a more careful, planned evolution. Dubai, it is recognized, has become the region’s hub extremely quickly. But there are concerns that crime in Dubai is increasing. Traffic congestion is paralysing the city, and the economy is overly dependent on debt and a seemingly never-ending real estate bubble.
"Dubai could be anywhere," says a Dubai banker. But Abu Dhabi wants to retain its Arabian character. It wants to construct the infrastructure before the real estate, and attract a higher class of visitor.
Building to last
Abu Dhabi’s 67,000 square kilometres make it by far the biggest and most powerful of the seven United Arab Emirates. With 9% of the world’s proven oil reserves, Abu Dhabi could maintain rates of oil production for the next 100 years. It has nearly 5% of the world’s gas reserves too.
But Abu Dhabi reportedly gains more income now from its financial investments than from its oil revenues. For financiers, it is home to the fabled Abu Dhabi Investment Authority: the world’s biggest sovereign wealth fund, and one of the most secretive.
If Abu Dhabi’s wealth were split equally among its citizens, they would have (at a conservative estimate) at least $2 billion each in international financial investments. Abu Dhabi’s $46,000 GDP per capita is one of the highest in the world. But that figure takes into account 1.4 million residents of Abu Dhabi. If only the 350,000 or so Abu Dhabi nationals were considered, per capita GDP would be more than $500,000.
It was partly to make up for its lack of the resources that Abu Dhabi can boast that Dubai, the second largest of the United Arab Emirates, decided to embark on its transport, tourism, and real estate boom.
Abu Dhabi is now following with a port whose capacity will be greater than that of Dubai’s Jebel Ali, which is the Gulf’s busiest port. Abu Dhabi is also establishing the world’s biggest industrial free-trade zone, which will house the world’s biggest aluminium smelter.
An estimated $100 billion will be invested in infrastructure projects in Abu Dhabi over the next five years, and the emirate’s population is expected to double in the next decade. But the most visual expressions of both Dubai and Abu Dhabi’s expansions encapsulate the differences between their economies.
Developers in Dubai have become famous worldwide for constructing flamboyant man-made islands that reach out in patterns into the Gulf. In contrast, Abu Dhabi is already surrounded by a number of natural islands that it is colonizing as it grows.
In order to house new districts of the city, these natural islands need to be protected from the sea and to be furnished with roads, water supply systems, drainage, and sewerage.
"These are comprehensive developments," says Gurjit Singh, chief property development officer at Sorouh, one of Abu Dhabi’s biggest developers.
Even so, the opportunities and costs of building on islands that already exist would seem to be far more attractive than Dubai’s experience.
In addition, rather than primarily being places for people to live, Abu Dhabi’s islands are trying harder to be places where people would go to have fun and to make money. For example, Abu Dhabi city’s biggest island development, the $27 billion, 27 square kilometre Saadiyat, will contain both businesses and homes, and will focus on providing cultural activities. Among other attractions, it will house a branch of the Guggenheim Museum, as well as the first subsidiary of Paris’s Louvre.
Further to the southeast, Yas Island will include a Formula 1 motor-racing circuit, as well as the world’s first Ferrari theme park (Mubadala, a state-owned investment fund, has a 5% stake in the Italian car maker) and Al Suwwah Island is to be the heart of the city’s financial district, and will house an outlet of the Cleveland Clinic, a US teaching hospital.
A concerted effort
"The approach to the city is very visual, symbolic, and memorable. For example, it is proposed that the Boulevard will travel under seven high arches, representing the seven Emirates of the UAE, and terminate at the main capital square."
This is an excerpt from Plan Abu Dhabi 2030: a 180-page document that sets out "themes to be refined in further planning and design" as well as conceptual land-use plans and street patterns. Conceived with an eye to the high quality of life enjoyed in Vancouver in Canada, it is meant to provide a guide for the Urban Planning Council, a government agency created last September.
Abu Dhabi, the document says, should be a "contemporary expression of an Arab city", with measured growth and a sustainable economy. A will to avoid the bad memory of Dubai is evident everywhere.