When it comes to future proofing the economy against potential global and regional risks, the UAE is pulling out all the stops. The oil price rebound, which saw prices rise to above $80 a barrel this year, is likely to trigger a recovery in the UAE’s GDP growth. After hitting a multi-year low of 1.5 per cent in 2017, the country's GDP growth is expected to touch 2.6 per cent in 2018.

For the capital and largest emirate of Abu Dhabi – home to more than 90 per cent of the UAE's oil reserves – this recovery creates the opportunity to maximise revenue generation opportunities from oil, alongside diversification efforts aimed at ramping up non-oil revenues.

A major contributor to the rise in oil prices is increased demand for refined products and chemicals in markets like Asia – a trend that Abu Dhabi has identified.

Heading downstream

To meet this demand and establish itself as a leading downstream player, state-owned Abu Dhabi National Oil Company (Adnoc) is stepping up investments in downstream operations along with firms globally to build the world’s largest integrated refining and petrochemicals facility in Ruwais.

Adnoc’s new refinery will boost its current capacity by more than 65 per cent by 2025, making it the largest facility providing gas, liquefied petroleum gas, petrol, jet fuel and other refined products.

Efficiency drive

In addition to its downstream expansion efforts, Adnoc continues to display commitment to its upstream business. For the first time, Adnoc has offered blocks as part of a competitive bidding process to international players, in an effort to build efficiency and ramp up profitability.

The quest for efficiency is not limited to the energy sector. Financial services and sovereign wealth funds are also making strides in combining synergies of established companies to form larger, robust entities equipped to compete at a global level.

Last year, National Bank of Abu Dhabi and First Gulf Bank were combined to form First Abu Dhabi Bank, creating the UAE’s largest bank and one of the biggest lenders in the region.

The next big announcement might come from Abu Dhabi Commercial Bank (ADCB), Union National Bank (UNB) and Al-Hilal Bank, which are in preliminary stages of merger talks.

New investment vehicle

After merging with International Petroleum Investment Company last year, Mubadala Investment Company will now merge with Abu Dhabi Investment Council (ADIC) to form a new $200bn investment vehicle.

This fund will combine ADIC’s energy industry investment capabilities with those of Mubadala, which strives to deploy surplus revenues into investments that meet the emirate’s economic goals and create wealth for future generations.

Consolidation of state entities

When it comes to the public sector, the alignment and restructuring of government departments has been an ongoing process.

The Urban Planning Council and Department of Municipal Affairs have merged to become the Department of Urban Planning & Municipalities, forming one consolidated entity to drive Abu Dhabi's urban development strategy.

More recently, the Department of Energy was formed to umbrella entities in the power and distribution sector. This wave of consolidation among government entities, and even the social and education sectors, highlights the government’s efforts to form institutions that are leaner and more agile, and adequately prepared to compete in a renewed economic environment.

Tourism offerings

Over the years, the UAE has also emerged as a hub for tourism and hospitality, and is continuing in its efforts to further cement that position. Numerous tourist attractions have opened, providing a good mix of amusement parks and themed destinations.

Abu Dhabi alone reported that a record 4.875 million people stayed in the emirate's various properties in 2017. Indeed, the capital is emerging as a cultural and entertainment magnet, with attractions such as The Louvre and the world’s largest indoor theme park, Warner Bros World.

READ MORE: Abu Dhabi cuts tourism fees

Abu Dhabi is also set to host the 2019 Special Olympics World Summer Games, the largest humanitarian and sporting event of 2019.

With Dubai's Expo 2020 just around the corner, the number of visitors to the UAE is only expected to rise.

Encouraging business

Aside from building its reputation as a tourism hub, the government is also making efforts to increase the attractiveness of the UAE as a business destination and residence for expatriates.

The newly announced move to allow foreign owners 100 per cent ownership of companies beyond free zones and the introduction of a 10-year visa for professionals, investors and scientists mean that the country, already populated with far more expats than locals, will see a further influx of foreigners settling on its soil.

Economic stimulus

Setting out short and mid-term plans, oil-rich Abu Dhabi has announced an AED50bn ($13.6bn) stimulus package to boost its economy, bolster growth across sectors and create jobs.

If the oil price recovery is sustained, rising oil prices will fund the stimulus plan. This would mean the government could increase budgets for implementing policies and reforms in the innovation and digitisation spheres.

Perhaps setting an example in the financial services space, Abu Dhabi Global Market (ADGM) seeks to make the emirate a Fintech hub in the Middle East and North Africa region through initiatives such as FinTech Abu Dhabi and the creation of the associated Regulatory Laboratory.

Smart city

Abu Dhabi’s efforts to become a smart city have already been acknowledged – the emirate ranked the highest in the Middle East and Africa region in its use of technology to enhance residents' quality of life.

Through these efforts spanning diverse sectors, Abu Dhabi has clearly displayed its intent to respond to changing economic dynamics. Diversification efforts and government spending are already showing signs of paying off, if GDP numbers and real estate rates are an indication. The foundation of a more robust non-oil sector has been laid and the time is ripe to build higher.

About the author

Sudhir Arvind is a partner at KPMG Lower Gulf

FURTHER READING:

Brief: The focus of growth shifts to Abu Dhabi

Economy & Governance: IMF praises the UAE’s economic prospects

UAE presses forward with an expansionary budget

Shifts in UAE sovereign debt dynamics

Oil & Gas: Fujairah expands midstream capacity

Power: Progress made on Dubai’s clean energy targets

Transport: Rail plans are back in the spotlight for the UAE

Construction: Abu Dhabi’s construction sector receives a boost

Databank: Key economic figures for UAE (November 2018)