Emirates to revive ambitious regional plans

15 April 2009
The United Arab Emirates, the region's only federal state, plans to play a pivotal role in the Gulf and the wider Middle East but its leaders need to co-operate more closely to achieve this.

There have been many turning points in the history of the UAE. In 1952, the Trucial States Council was formed to encourage co-operation among the rulers of the area this is now the UAE. A development office to promote economic projects was created in 1965. And in February 1968, the ruler of Abu Dhabi, Sheikh Zayed bin Sultan al-Nahyan agreed with the ruler of Dubai, Sheikh Rashid bin Saeed al-Maktoum.

There have been setbacks. Neighbours have challenged its territorial integrity. Tensions in 1979 prompted speculation that the federation would disintegrate. And since it was created, the UAE has been the subject of dismissive criticism from within the region and scepticism from practically everywhere else.

The record, nevertheless, is impressive. The UAE, since it was created, has probably been the most stable Middle Eastern country. One of the world’s poorest places in 1945, it is now one of the richest on a per capita basis.

The global recession that has rocked Dubai since last summer revived doubts about the resilience of the federation. Development ground to halt. Dubai was deemed by some as being ripe for a takeover.

The biggest issues are now being addressed. At the end of February, Dubai announced it planned to raise $20,000m through the sale of bonds. The Central Bank of the UAE immediately bought half and appears ready to take the balance.

Action has now started on distributing the first tranche. This process involves Dubai entities, most of them owned by the government, presenting their long-term plans to a committee of prominent Dubai officials. Those that fail to convince the committee of the merits of their strategy will receive none of the $10,000m at its disposal.

The method adopted to deal with Dubai’s financial difficulties is also politically astute. Although the money has been provided by Abu Dhabi, a federal entity is managing how it is disbursed. Dubai is fully in charge of the process of allocating the cash. There is no hint that Abu Dhabi is taking over Dubai entities, although companies that fail to secure financial support may independently decide to find partners or cash in the emirate.

Restructuring process

Dubai, as a result, will witness over the next six months a comprehensive process of consolidation and restructuring that might involve some businesses closing. Jobs will go and may never come back. It will be five years before Dubai recovers its old swagger.

Abu Dhabi in contrast is pressing ahead with its own plans. On 13 April, Emirates Steel Industries announced plans to establish 8 million tonnes a year (t/y) of steel capacity. This time in 2010, the first phase of what is planned to be the world’s largest single-site aluminium smelting complex will be opened by Emirates Aluminium in Taweelah. The expansion of the Borouge petrochemicals plant will be completed in the summer of 2010.

An ambitious urban development programme that will change the face of Abu Dhabi city is unfolding. Later this year, Abu Dhabi will unveil details of its healthcare and education programmes.

Abu Dhabi’s economic vision report published in January calls for the emirate to have a gross domestic product (GDP) in 2030 of almost $500bn in real terms. It is a tall order. But, with almost 10 per cent of the world’s proven oil reserves and as much at least $500bn in the bank, it is not an impossible dream.

Abu Dhabi is simultaneously demonstrating its commitment to the original dream that led to the creation of the UAE. On 14 April, president of the UAE Sheikh Khalifa bin Zayed accompanied by some of the most senior figures in Abu Dhabi visited Dubai in a public display of support. He posed for photographers with Sheikh Mohammed at Union House where the agreement setting up the federation was signed by Abu Dhabi’s Sheikh Zayed and Dubai’s Sheikh Rashid in December 1971.

Then, many believed the UAE could not survive. Today, it has the second largest economy in the Middle East and is preparing to become the first Arab state to become a civil nuclear power.

Stable, prosperous and tolerant, the federation plans to play a pivotal role in the region in the decades ahead. But for this to happen, its leaders will have to work together more closely. That is why the gathering in Dubai last week could be a new turning point, the moment that the UAE was relaunched by a new generation reaffirming themselves to the union their fathers forged.

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