Non-oil and gas investment in Abu Dhabi in 2023

There is no shortage of oil-rich countries the world over that are aspiring to achieve economic diversification, a goal that has proven to be truly elusive. The UAE, and especially its main oil-rich Emirate, Abu Dhabi, have been more successful than others in achieving economic diversification. This fact is reflected in official statistics: in 2022, Abu Dhabi’s GDP hit an all-time high figure of AED1 trillion, with true non-oil economic activities accounting for around 50% of the figure. Based on the current trend, Abu Dhabi will be a dominantly non-oil economy by the year 2024, if not sooner.

But how has Abu Dhabi achieved this feat, which had eluded many others before? What is different in the case of Abu Dhabi? For one thing, Abu Dhabi is deploying an array of modern institutions in a practical manner. These include financial hubs to fund local enterprises, incubators to support young businesses, and chambers of commerce to coordinate international cooperation and partnerships. Simply put, “the Emirate of Abu Dhabi is one of the leading destinations for doing business. It fosters a great business environments for facilitating trade and growing the industry,” as Mohamed Helal Al Mheiri, Director General of Abu Dhabi Chamber of Commerce and Industry (ADCCI) put it in a recent interview with TBY.

A good example of the institutions that make this possible is the Emirate’s hub for inflowing investment, Abu Dhabi Investment Office (ADIO), which provides foreign investors with guidance. Abu Dhabi’s—mostly—outflowing investment organization, Abu Dhabi Investment Authority (ADIA), is already well-known in business circles, and it is fair to say that ADIO is fulfilling a loosely similar function in the opposite direction. ADIO’s acting director general, Abdulla Abdul Aziz AlShamsi, thus explained the finer aspects of the organization’s function to TBY: “It is not just about attracting foreign companies to Abu Dhabi; it is about creating sustainable private sector opportunities for long term commercial growth that contributes to the Abu Dhabi economy. Therefore, in terms of our offerings and the different instruments that we have been provided by the government, we think about how to best nurture and originate opportunities here on the ground.”

Economic diversification will not be possible without investment. Investment will not only fuel the diversification process but will also function as an endorsement by international parties, indicating that market players and investors have faith in Abu Dhabi’s vision—enough faith to take the financial that come with a major investment. Abu Dhabi—and the UAE in general—have been quite successful in attracting investors. The Foreign Investment Report (2022), published by the UN Conference on Trade and Development, ranks the UAE as the region’s number one investment destination, in terms of FDI.

Branding is a crucial step in attracting investments. With a view to encourage more investors to come over through raising awareness about the Emirate’s potential, Abu Dhabi has established a yearly conference known as the Annual Investment Meeting (AIM).

The event’s 2023 edition took place at the Abu Dhabi National Exhibition Center (ADNEC) in May 2023 to specifically discuss “the investment paradigm shift: future investment opportunities to foster sustainable economic growth, diversity and prosperity.”

The event brought together a large number of private sector investors from every corner of the world and a large number of decision-makers, including finance ministers and industrialists. Also in attendance were “representatives of multinational and large companies, start-ups, small and medium-sized enterprises, smart cities solutions providers, technology services vendors, and a large number of visitors from over 170 countries worldwide,” according to Zawya. The sheer number of delegations attending AIM 2023 and the diversity of their areas of business is indicative of the Emirate’s success in economic diversification.

AIM 2023’s keynote speaker, the business leader Ahmed Jasim Al Zaabi, pointed out during his presentation that, fueled by investment, Abu Dhabi’s economic diversification has become something tangible, putting the Emirate and the UAE on the verge of a paradigm shift toward a true knowledge-based economy. “Abu Dhabi is witnessing the rise of the falcon economy, which continues to go from strength-to-strength, driven by agile policies and robust regulatory and legal framework, making us an anchor for companies looking to expand their operations in the region,” argued Al Zaabi, according to Zwaya.

The aforementioned “falcon economy” refers to a rapidly growing economy that is in the middle of a transformation from an emerging and non-diversified one into a modern economy. Falcon economies are popular with investors, as they often offer handsome profits.

Abu Dhabi is, in a way, the quintessential falcon economy. It is exactly halfway through its economic diversification project (with non-oil sectors now accounting for 50% of the GDP), which can be said of very few oil-based economies aspiring for diversification. It has shown a level of openness to new ideas, which is unprecedented in the region, and it has a high level of commitment to sustainability.

The Emirate has also thought of the right mechanisms to absorb the incoming investments. While the ADIO guides investors and events such as AIM, bringing them together for in-depth discussions, there are organizations that enable investors to securely inject their funds into the Emirate’s economy and benefit from the ensuing growth. Abu Dhabi Initial Public Offering Fund (ADIPOF) is one such body. The fund is a “is a government led initiative that enables private enterprises to accelerate growth by facilitating IPOs on Abu Dhabi Securities Exchange (ADX),” according to the ADIPOF. Since ADX allows foreign nationals to start trading with minimal paperwork, Abu Dhabi-based companies about to launch their IPO can now happily raise capital from all over the world.

In 2022, this happened to at least six major private sector businesses. The six companies were shortlisted to join the Emirate’s securities exchange by launching their IPOs, and they manged to raise up to USD1.4 billion in the process. There are 30 more Abu Dhabi-based companies waiting for their IPOs in the coming months.

Listing on the ADX has become more-or-less synonymous with receiving a sizable investment. But the IPO fund has placed a stronger emphasis on “sectors like fintech, healthcare, [and] agriculture technology,” according to Mohamed Al Shorafa, Chairman of the Abu Dhabi Department of Economic Development (ADDED). This selectiveness in favor of non-oil industries will surely further help Abu Dhabi’s drive toward economic diversification.