Portraits of the UAE’s seven rulers were draped across the city’s buildings and flags flew proudly as the Supreme Council met to celebrate its 36th National Day on 2 December.

Describing his vision for the year ahead, President and Abu Dhabi ruler Sheikh Khalifa bin Zayed al-Nahyan said it would be “the year of national identity”, which would strengthen society across the seven emirates. “One who has no identity has no present, and will have no future,” he added.

Abu Dhabi has always been the lynchpin of the federation. It was the vision of the late Abu Dhabi ruler Sheikh Zayed bin Sultan al-Nahyan, who believed the emirates would enjoy a brighter future together, rather than existing independently. In 1971, Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaiwain and Fujairah formed the federation, which was joined a few months later by Ras al-Khaimah.

Together with the six other emirates, Sheikh Zayed created a society known throughout the region for prosperity, tolerance and benevolence. “The society built by the late president Sheikh Zayed bin Sultan al-Nahyan is unique,” says Khaldoon Khalifa al-Mubarak, member of the Abu Dhabi Executive Council and chairman of the Executive Affairs Authority. “People always look at the UAE in a different way because of the diverse population mix, where more than 75 per cent of people come from other countries.”

Solo development

The concern for the federation is that Abu Dhabi is now focusing on its own development at the expense of the federation. “Dubai has been forging ahead by itself for many years,” says a Dubai-based analyst. “But when Abu Dhabi starts to focus on developing itself, I begin to worry.”

Abu Dhabi is in a difficult position because it has to balance its interests at a national and federal level. “The federation allows the emirates to attend to their own business,” says Abdulkhaleq Abdulla, professor of political science at the UAE University in Al-Ain. “It has been that way for 35 years. Abu Dhabi normally balances its own interests with its federation responsibilities. But lately there has been a perception that it is more interested in its own business than the federation’s. This is not what we have seen in the past and it opens up issues that were not there before.”

In early September, Abu Dhabi’s Executive Council launched a strategic plan outlining the government’s aims and objectives for the coming years. The document clearly shows how the capital is focusing on improving its standing against its regional rivals – Dubai and Doha.

The launch was important for the emirate, and Crown Prince and Executive Council chairman Sheikh Mohammed bin Zayed al-Nahyan addressed a press conference to stress this.

Abu Dhabi’s government institutions needed an overhaul. “In 2004, when the new Executive Council was established and chaired by Crown Prince Sheikh Mohammed bin Zayed al-Nahyan, the ruler Sheikh Khalifa bin Zayed al-Nahyan gave it clear instructions to develop a clear plan with four key areas to focus on: restructuring the government, education, healthcare, and economic diversification,” says Al-Mubarak.

“In 2004, there were 85 different entities that reported to the Executive Council. Today, there are 21, and the number will go down further. The idea is to simplify the bureaucracy and make the decision-making process quicker.”

Another key change will be in the way public services, such as healthcare and education, are provided. The Abu Dhabi government plans to become a regulator overseeing the provision of public services by the private sector. “The government has decided it can do a much better job as a regulator,” says Al-Mubarak.

For the private sector, this creates new business opportunities. For example, the collection of solid waste was privatised in 2006, when the joint venture of the local/Kuwaiti Emirates Utilities Company Holding with Italy’s IMA and the local Aqua was awarded a $136m, 10-year operation and maintenance contract. “As a businessman, I am overwhelmed with opportunities,” says Salah Salem bin Omeir al-Shamsi, chairman of Al-Qudra Holding. “But opportunities do not wait for people, you have to run [after them].”

Abu Dhabi Municipality has been one of the key areas for reform. Over the past three years, it has been streamlined to make it more efficient and effective at providing public services. “The municipalities have been broken down into three different areas: Abu Dhabi, the western region and Al-Ain,” says Al-Mubarak. “So it is a dramatic change in the way they operate. In 2004, the municipalities had 65,000 employees. In 2007, they have 15,000.”

With the government machinery in place, economic reform is now firmly on the agenda, with the development of sectors such as real estate, industry, tourism and financial services.
Real estate has been a real growth industry. Since early 2005, more than $140bn worth of real estate projects have been launched, which include Reem, Saadiyat, Yas and Bahraini islands. “For the first time in our history, we see a real estate sector in Abu Dhabi,” says Al-Shamsi.

Tourism is another sector being earmarked for rapid growth. “The target is 3 million tourists a year and I think that is achievable,” says Al-Mubarak.

But the capital does not intend to abandon the bedrock of its economy. “As much as we diversify and push other sectors, it is important to remember we are, and will always be, an energy-based economy,” he adds.

Financial costs

But the fear among some in the region is that Abu Dhabi will overlook its commitments to the federation. Abu Dhabi bears the brunt of the financial costs of the union, and as the largest emirate, it makes the biggest contribution to the federal budget, followed by Dubai.

Without large energy reserves, the northern emirates cannot keep pace with Abu Dhabi as it continues with its ambitious spending plans. “The fabric of the federation is stretched by the uneven allocation of natural resources,” says a Dubai-based consultant. “You will end up with a concentration of economic and natural endowments in Abu Dhabi, and at the same time, 200 kilometres away there will be populations that do not have any natural endowments. How do you balance that?”

The gap is expected to widen further as Abu Dhabi and Dubai take control of various social services. The most important in the long term is education, which will still be governed by the federation but will be provided by the emirates.

“Two important camps used to be held within the federal machinery, but have now been moved under emirate control. They are healthcare and education,” says the consultant. “The result will be that the level invested in healthcare and education for a child in Abu Dhabi will be more than in other emirates.”

Abu Dhabi has also removed its legal system and police service from federal control. They are now governed locally by the Justice Ministry and Interior Ministry respectively.

But even though Abu Dhabi can afford to do most things by itself, many of the most challenging issues it faces must be resolved at a federal level. Rapid growth has led to almost double-digit inflation across the emirates and as the volume of construction work continues to grow, manpower is expected to become a major issue. “Abu Dhabi is not a country, it is an emirate,” says the consultant. “There are many issues it must face as a country, such as labour and monetary policy.”

However, a wealthy Dubai and Abu Dhabi will generate wealth for their neighbours. The real estate boom in Dubai has paved the way for projects in Sharjah, Ajman, Umm al-Qaiwain, Ras al-Khaimah and Fujairah, and as Abu Dhabi begins to develop, it should generate more critical mass for outside investment – an effect that will spread to its neighbours.

The danger is that as the emirates compete with one another without centralised co-ordination at a federal level, the economy could be oversupplying certain markets. “You are on a road with three global airports being built within 150 kilometres of each other, and that demonstrates the underlying spirit that the emirates compete,” says the consultant. “Does it make sense for them to do that or should they co-operate? It is an ongoing issue, and it needs to be addressed.”

Key challenge

Ensuring a consistent pace of developemtn and investment across the seven emirates.

Investment priorities across the UAE

Abu Dhabi

  • Transport

  • Education

  • Healthcare

  • Petrochemicals

  • Industry

  • Tourism

Ajman

  • Privatisation of government departments

  • Reducing pollution

  • Water conservation

  • Alternative energy

  • Education

Dubai

  • International investment

  • Transport

  • Tourism and leisure

  • Logistics

  • Aviation

Fujairah

  • Increase foreign investment

  • Increase overseas investment portfolio

  • Industrial development

  • Port development

  • Education

Ras Al-Khaimah

  • Tourism and leisure

  • Free zone investment

  • Employment and training facilities

  • Industry

  • Education

Sharjah

  • Aviation

  • Tourism and leisure

  • Transport

  • Education

Umm Al-Qaiwan

  • Tourism and leisure

  • Education

  • Water infrastructure

  • Commerce