Much to Explore

While emerging markets around the world struggled to attract investment over 2018, Abu Dhabi continued to increase its profile as a prime investment destination in the wider region.

2018 came with a widespread deterioration of investment sentiment in many of the emerging markets grouped under the MSCI Equity Index. However, within the UAE, the Emirate of Abu Dhabi has grown to become a more sophisticated, diversified market built on a solid foundation that has proven to be extremely attractive for capital inflows. Every sector of its economy, if properly analyzed, will unveil a variable degree of value that appeals to different types of investors and investments. Broadly speaking, Abu Dhabi offers a sound, stable political and regulatory environment; a comprehensive and flexible legal framework; a fair and transparent tax system; an effective corporate governance structure; low levels of debt; and a strategic geographic location to use as a gateway.

As a result of a rebound in oil prices, supporting fiscal policy, and higher deposits at banks, Abu Dhabi’s economy recovered in 2017, with an upswing in non-hydrocarbon exports as well as FDI. Inflation remains flat at a moderate 3.4%, despite the introduction of VAT, due to continued softening in the housing sector. Moreover, public spending increased by 23% YoY, especially on infrastructure and capital development, which had a direct repercussion on the growth of non-oil foreign trade, which led to an expansion of inflows that outpaced the growth of outflows.

A potential concern for investors is Abu Dhabi’s heavy reliance on the hydrocarbon industry. The drop of oil prices led to the Emirate’s GDP contracting from AED960.1 billion in 2014 to AED728.5 billion in 2015. Moreover, although non-oil GDP accounts for 51.9% of the Emirate’s total GDP, the engine of overall growth in GDP in 2018 is still the rise in oil prices, at over USD70 per barrel. However, structural reforms, both within the local hydrocarbon industry and at a regulatory level, are set to further advance Abu Dhabi’s diversification strategy and stabilize the business environment, with the more specific goal of creating jobs and revamping the labor market.

Data from the IMF confirms the macro positive trend impacting the Emirate’s real GDP growth. The economy is expected to grow at 0.5% and 2.6%. respectively, in 2018 and 2019. Indicating slower growth in the oil sector impacting overall GDP growth, IMF data showed that Abu Dhabi’s oil GDP grew -2.4% last year with flat growth ahead for 2018 and 2.4% growth in 2019.
The private sector still plays a minority role in the overall economy, but recently announced economic reforms are set to address this condition, such as the injection of a USD50-billion stimulus package aimed at reviving the sector. Moreover, Abu Dhabi’s sovereign wealth funds like ADIA or Mubadala Investment Company, by investing either in foreign or domestic assets, provide a solid financial buffer for the whole macroeconomic system in case of major financial shocks. They also represent an appealing business partner for foreign companies entering the Abu Dhabi market, both for their funding capacity and connections with the government.

Local presence: special zones

A local presence in Abu Dhabi offers significant reputational and economic incentives to foreign firms. In 2018, the government announced an extensive wave of regulations aimed at increasing even further the benefits of setting up a business in Abu Dhabi through JVs, strategic partnerships, or full-ownership to exploit the growth of neighboring emerging markets.

These regulatory updates include permanent home licenses that exempt the requirement of having an office or work space for two years; instant licensing for most commercial license types and all government services; the acceleration of the settlement of due payments on contracts for the private sector through a centralized claims platform, Sharakah; a cost-cutting review of building regulations for infrastructure, residential properties, commercial, and industrial sectors; and the issuance of dual licenses for companies in free zones to allow them to work outside the free zones and bid for government tenders. Moreover, new regulations such as in-country value, now limited to the energy industry, are likely to be passed on to other economic segments.


Strategically located between the cities of Abu Dhabi and Dubai, KIZAD offers access to markets through sea, air, road and future rail, connecting a business to more than 4.5 billion consumers. It is closely linked to Khalifa Port, one of the world’s most advanced deepsea ports and the region’s first semi-automated port. Served by 20 major shipping lines connected to over 50 destination ports, it enables the convenient domestic and international shipment of products and raw materials to and from Abu Dhabi to anywhere in the world.

KIZAD offers the freedom of choosing the ownership approach, as land plots can be subdivided and merged to guarantee flexibility. It also offers renewable leasehold for a period of 50 years, as well as the possibility of 100% full foreign ownership.
The first and second phases of KIZAD have been designed to accommodate various types of light, medium, and heavy industries. The targeted business sectors include steel, pharmaceuticals, life sciences, chemicals, biotechnology, metals, food and beverages, logistics, and transportation. Currently 200 companies operate in KIZAD with investments of AED60 billion, including Emirates Global Aluminium, Jiangsu Provincial Overseas Cooperation and Investment Company Limited (JOCIC), and COSCO Shipping. Since July 2017, 15 Chinese companies have signed lease agreements for land in KIZAD with a total investment of USD1 billion.

The ongoing expansion strategy of Khalifa Port, which will go from handling 2.5 to 8.5 million TEUs by 2023, represents aconcrete example of the potential KIZAD offers for setting up a local presence in Abu Dhabi. Moreover, in 2018 MSC committed to an investment of AED4 billion for a new container terminal and aims to further strengthen the UAE’s position in attracting major international companies at Khalifa Port. Export-oriented industries with a solid manufacturing base can make use of direct access to Saudi Arabia, India, and East Africa. Most of the local market in terms of raw materials is close to saturation, and new entrants catered to the local market are likely to face resistance from local players that have already seen their margins decrease significantly over the past couple of years.


Over a total area of 40sqkm on the outskirts of Abu Dhabi, ICAD offers businesses a wide array of utility, communication, and connections to highways, airports, rail depots, and sea ports, as well as comprehensive worker residential cities services. The existing five zones of ICAD are each specifically designed to meet operational requirements of different industries.
Manufacturing: All products manufactured within ICAD are granted duty-free access to the GCC and all countries signed up to the Greater Arab Free Trade Agreement and tariff-free access to more than 22 countries across Asia, Europe, and MENA. Furthermore, companies and employees benefit from tax exemption on income, duty exemption on the import of machinery and raw materials, and free repatriation of profits.

Energy: This location is expected to gain traction for EPCs especially in light of the announcements to increase oil and gas production by ADNOC. New exploration, marginal fields—sour and ultra-sour, and even unconventional assets all came into focus, albeit at a higher production cost, thanks in part to energy security considerations and the economic viability of the petrochemical industry from a cash cost point of view.

Aerospace & defense: Its proximity to Abu Dhabi International Airport and Dubai Al Maktoum Airport makes it also very attractive for players in the aerospace and aviation industry. Abu Dhabi seeks to become the region’s gateway for manufacturing, MRO services, and technology development. A number of international players including Boeing, Airbus, Rolls-Royce, NASA, Lockheed Martin, BAE Systems, Northrop Grumman, and Piaggio Aerospace, among others, have set up partnerships and JVs with the three largest players in the UAE’s defense industry.
However, Abu Dhabi’s government is pushing to build a robust local defense industry, and a higher degree of commitment is required to ensure business viability, as shown by US and French group Thales.


Established with the goal of becoming an international financial center that can stand alongside the world’s leading cities such as Hong Kong, Singapore, London, and New York, Abu Dhabi Global Market (ADGM) seeks to capitalize on the competitive advantages of Abu Dhabi’s financial landscape: private banking, wealth management, and asset management. As such, it provides an efficient and business friendly registration arbitration process for businesses in the financial and regulatory services. As such, companies registered under ADGM include PwC, EY, Deloitte & Touche, KPMG, and State Street.

ADGM’s funds framework provides wide-ranging options for carrying out fund management activities to ADGM fund managers and foreign fund managers alike. While ADGM fund managers are permitted to manage both ADGM and non-ADGM funds, fund managers located both within and outside of ADGM can establish funds within its jurisdiction utilizing a wide range of available corporate, limited partnership, and trust vehicles, including sharia-compliant funds and structures. ADGM also developed a framework that allows for start-up and boutique fund managers to establish within ADGM to manage non-retail funds, as well as providing up-to-date regulation to become a center for fintechs and blockchain experts to register and grow their business. The world’s most active tech VC, Plug and Play, is an ADGM partner.

ADGM has established a comprehensive legal and regulatory framework to support a trading environment for several asset classes underpinned by the direct application of common law, including the sale, purchase, and potential freight of commodities, REITs, equities and debt instruments, derivatives, and setting up funds and captive insurance regimes. Among the benefits, ADGM offers a wide and favorable DTT network and a 0% CIT rate to ADGM companies, which means the UAE does not levy withholding taxes on outbound interest, dividends, or other payments.


Since its inception in 2008, the Media Zone Authority has created 3,500 media jobs, established a database of 11,000 creative professionals on whose talents it can draw, and trained more than 6,800 people through its innovative media courses. This special economic zone is a media hub that has attracted over 470 companies, both from the media and PR sectors, providing them with a full range of services and comfortable office set-up. Under the guidance of the proactive and flexible approach of Abu Dhabi Media Zone Authority, the sector offers great potential for the production of Arabic content. Moreover, in 2016, Chinese government-backed fund ICC forged an agreement with Image Nation to create a USD300-million fund to jointly invest in film and television content in Hollywood, the UAE, and China.

In 2020, the media and entertainment free zone will relocate to Yas Island. The move will increase twofour54’s capacity by 25%, which will help it expand, evolve, and continue attracting partners that already include Sky News Arabia, Ubisoft, CNN, Fox, Flash Entertainment, M&C Saatchi, and Flat6Labs.

Local presence: non-special zones


As the Abu Dhabi government continues to invest in developing its knowledge-based economy, the education sector has experienced a rapid expansion, with the number of private schools continuing to grow dramatically in anticipation of significantly increased enrollments—283,800 students are expected to be enrolled in Abu Dhabi by 2021. Since almost 58% of Emiratis send their children to private rather than public schools, it is projected that the private education market will require an additional 52 educational facilities across multiple curricula, out of which 10 will be American schools. Local operators are in demand to introduce K-12 American schools and the market features significant space constraints in the primary and pre-primary segments.


Abu Dhabi can count on an internationally recognized sport infrastructure that is regularly selected to host competitions at both a regional and global level, such as the Asian Games, the AFC Cup, the International Champions Cup, and the Special Olympics. The hot summer weather and cultural biases make Abu Dhabi a location with a huge amount of potential in terms of sport services and micro-infrastructure. TBY believes the growth in population and awareness will happen gradually, but the boom in interest in sports will happen at an extremely rapid pace. As such, 2018 is the best time for investors to study their next move, establishing contacts with the government agencies, and making their own estimates on how and when to invest.


Located about 240km west of Abu Dhabi, Ruwais was developed by Abu Dhabi National Oil Company (ADNOC) and hosts a number of petrochemical industries. It includes an oil refinery plant, natural gas liquids fractionation plant, a fertilizer plant, a marine terminal, and a sulfur handling terminal. In 2018, ADNOC announced the construction of what is intended to be the world’s largest integrated refining and chemical site in the world.

The planned complex in Ruwais will produce 14.4 million tons of petrochemical products annually by 2025 as part of the Emirate’s plan to diversify its sources of income under its 2030 growth strategy. These projects represent great opportunities for players in construction, utilities, refining, and petrochemicals. Moreover, Ruwais will transform into a fully fledged city, with construction aimed at building at least 3,000 new homes and leisure and services infrastructure.


The UAE’s retail sales turnover is expected to exceed USD71 billion by 2021, with Abu Dhabi contributing 40%. Recent data from LinkedIn showed that Abu Dhabi’s fastest-growing industries over the past 15 years have been the retail and hospitality sectors. As such, analysis of the ongoing development pipeline indicates that about 0.29 million sqm of new retail space is expected to be handed over in the Abu Dhabi market during 2018-2020.

A report by JLL stated that with retail inventory levels expanding, mall operators are more open to negotiating with tenants. That being said, retail in Abu Dhabi remains catered to the medium-high segment, although the majority of new international retailers entering the Abu Dhabi market last year were in the F&B component. This is in line with the growth of delivery services in Abu Dhabi, as a recent report by KPMG stated that three residents out of four order takeaway at least once a week.

Liquid assets

Abu Dhabi’s financial sector has the potential to generate great value for both institutional and retail investors. In the banking and asset management segment, the Emirate is witnessing a series of M&As bound to generate solid financial statements, widen investment to a more diversified class of assets, and issue credit to a wider pool of applicants. Moreover, the increase in private sector deposits by 2.1% could be explained by the strong level of growth in the non-oil sector of the economy.

Public market

Abu Dhabi’s financial markets are at the center of regional optimism in public equities and bonds. Listed companies’ market cap on Abu Dhabi Securities Exchange, the region’s leading financial market, together with Saudi Arabia’s Tadawul, reached AED526 billion by the end of August 2018, with a remarkable increase in the ADX general index of 13.4% YoY at the start of 2018. By the end of August sessions, the market capitalization of domestic public companies listed on the ADX increased to AED495 billion, compared with AED461 billion at the beginning of the year, an increase of 7.5%. The market capitalization of private-listed companies on ADX reached AED7 billion, compared to AED2.8 billion at the beginning of the year, an increase of 145%. By the end of the August 30 session, the market capitalization of foreign public companies listed on ADX reached AED24 billion, bringing the total market capitalization of domestic, foreign, and private companies listed on ADX to AED526 billion.

About 48% of the 966,000 investors registered with the bourse are from outside the UAE, attracted by the highest dividend yields in the world at 5.8%, a distribution of more than AED23.4 billion in cash dividends to around 406,000 investors on behalf of listed companies in 2018. Moreover, a number of high-profile players are becoming increasingly attracted to the prospects of floating their shares. The forerunner in this sense was ADNOC Distribution, which not only raised USD851 million, listing its shares on the ADX last December 2017, but also approved a AED735-million (AED5.88 fils per share) dividend payment at the company’s first annual general meeting. Looking ahead at local markets, Emirates Global Aluminium is likely to be the star with an expected IPO size of USD3 billion, while Abu Dhabi Ports is targeting around USD1 billion.

Private market

The private market outlook in Abu Dhabi is mostly based on private equity activity focused on growth capital, uncovering value by identifying propositions, and synergies across financial services, real estate, hospitality, education, and energy. More recently, industry insiders have started upgrading technologies and systems, which entails acquiring mostly minority stakes of portfolio companies and working closely with management.

Given the more limited nature of the private debt market compared to the equity one, investors may engage in providing liquidity and debt capital solutions across the whole region to primary clients such as real estate developers, financial sponsors, and corporates in a transitory state with potential returns of around 10%. However, debt issuers will face the revamping of the UAE banking system, as most UAE banks expect stable or better net interest margins—the difference between what banks earn on assets and pay on liabilities and customer deposits—in 2018 amid three interest rate hikes by the Fed.

Principal investments

Principal investments represent a substantial share of assets held by many companies operating in Abu Dhabi, with key investment sectors being aviation leasing, energy, fintech, financial services, and industrial real estate. Acquiring stakes in Abu Dhabi’s public medical facilities also offers potential for good returns, especially in one of the 15 medical facilities or over 60 ambulatory and primary healthcare clinics owned and operated by Abu Dhabi Health Services Company (SEHA). Setting up a business given the current status of the market is inadvisable, as the Emirate is currently faced with an oversupply of facilities and personnel, and an under-supply of stable, specialized doctors.

Illiquid assets

On the back of continued sluggish economic performance, Abu Dhabi’s occupier rental rates continue to trend down across all segments of the market. Concerning the rental market in Abu Dhabi, values declined by 10.2% in 2017 after a drop of 2.8% the previous year, consistent with the lagged effect on the job market and the outlook for the economy given continued fluctuations in oil prices. The slowdown in new supply could provide a floor to rental values across the capital in the long run. This is particularly the case in the Prime and Grade A segment, where supply is already somewhat limited. These segments of the market begin to bottom out at a faster rate compared to the mainstream market.

Commercial and residential

In 2017, the average price in Abu Dhabi housing declined compared to the previous year, reaching AED12,381 per sqm. Thus, the downward trend illustrates a further deterioration in the residential market during 2017 by 7.6%. Moreover, the surge of labor demand in the construction and the real estate sectors was accompanied by a jump in domestic credit allocated to both sectors by 15% during the same period. The increase in domestic credit to the construction and real estate sectors is the highest since 2014. These numbers allow for a difference between pricing and valuation that investors with a longer-term perspective can exploit with relative easiness, even at the cost of not breaking even in the next three to five years.
The contracting business is extremely competitive, especially on the traditional materials segment, which now sees export market as the main way to preserve profitability. However, there is growing demand for players with experience in new building materials, or reinterpretations of existing materials. Current players are starting now to look at new technological upgrades, and the timeframe between exploration and full ownership of new methods allows for market entry potential.

Leisure and hospitality

Across the real estate spectrum, the leisure segment is perhaps the most attractive as of 2018. Abu Dhabi’s secure, stable, modern infrastructure allows for a smooth integration of market entrants both in the development and services sector. While the hotel market at the high end fights on thin margins, there is a gap in the medium-high segment of the industry for more risk-prone developers to exploit. At the same time, more risk-averse investors might look into Abu Dhabi’s gap of integrated tourism services: most hotels deal directly with a full-range of services that Western markets outsource to third parties.
Looking at the shorter-term perspective, aside from the already-mentioned Ruwais developments, Saadiyat perhaps offers the most attractive investment avenues in a wide range of leisure, entertainment, residential, hospitality, educational, and cultural facilities. Saadiyat Cultural District offers plots for mixed-use including residential, retail, and office developments, in what is set to be an area of international significance due to the proximity of world-class museums and flagship shopping destinations. Saadiyat Beach is the hospitality and leisure area of Saadiyat, with renowned hotels and a beach club already in place along and established residential communities. The area offers opportunities to purchase built assets, build your own home, or a number of other mixed-use opportunities.