Few could doubt the grandiose ambitions of Abu Dhabi as the once sleepy emirate seeks to reinvent itself.
The oil-rich capital of the United Arab Emirates has already done deals that will see a Louvre and Guggenheim museum grace one island. Another island will host a grand prix racetrack and Ferrari theme park.
Last week Abu Dhabi chose Farnborough airshow to announce to the world its ambitions in the aerospace industry.
Etihad, the emirate’s airline, placed orders for 100 aircraft with options for a further 105, which could eventually be worth $43bn. And Mubadala, the increasingly powerful state investment company, announced plans for a facility that will manufacture high-tech aerospace parts for EADS, the parent of Airbus, and a joint venture with Rolls-Royce to provide engine maintenance services.
The question is whether the emirate will deliver on its grand designs.
Officials say the ultimate aim in aviation is for Abu Dhabi to become a “tier one” supplier of parts to the two big manufacturers – Airbus and Boeing – and for the emirate to be an aerospace hub, providing a range of services from maintenance to component production.
The broader strategy is to diversify the oil-dependent economy and create jobs for young emiratis in specific sectors. There are plans for petrochemicals, aluminium smelters, steel plants and tourism. In effect it is using its oil wealth to start industries from scratch.
Abu Dhabi’s transformation comes after decades during which its leaders have cautiously tucked away most of the oil revenue in sovereign funds such as Adia, the Abu Dhabi Investment Authority.
The aerospace industry is perhaps the most ambitious element of the strategy. About three years ago the emirate had plans to set up plants to manufacture auto parts, but that project never got off the ground, says a banker in the region. Abu Dhabi has tremendous financial resources, but previous unsuccessful projects in the Gulf prove that money does not guarantee success.
As a sector aviation is expanding in the Middle East, but Abu Dhabi will be competing with Dubai, which, through Dubai Aerospace Enterprise, has set itself the goal of creating a “global aerospace manufacturing and services corporation” and is ahead in terms of airlines and airports.
“It’s not for me to say whether the world and the pie isn’t big enough for two players,” says Waleed Ahmed Mokarrab Al Muhairi, chief operating officer of Mubadala. “I just don’t know the answer to that. What I do know is we have a vision. We are executing as rapidly and as methodically as we can to realise that vision, and you are seeing the fruits of that.”
Creating high-tech jobs for emiratis is crucial to the plan, but is highly dependent on reforms to the education system (see above) and its ability to train engineers. Given the small size of the indigenous population (about 420,000), it will still have to be able to attract skilled foreign labour.
“You start with a very small population and you have to ask how many graduates will be brain surgeons or top engineers,” the banker says. “They are going to have to bulk up and attract people to [become] the regional brain hub. Then perhaps they have a chance.”
Still, the scale of Etihad’s plane orders gives Abu Dhabi some standing with the likes of Airbus.
“If you are one of the biggest purchasers and you are the new player, you have a much bigger pile of chips,” the banker says. “You have to accept they are moving up the ladder; the question is how far they can get.”
Mubadala has been building up the aerospace component of its portfolio for two years, and has stakes in Piaggio Aero Industries, an Italian company, and SR Technics, based in Zurich. It is also sole owner of Abu Dhabi Aircraft Technologies, a maintenance company that will be involved in the joint venture with Rolls-Royce.
Mr Muhairi says the company diversifies for “very specific” ends. “In this case its about the academic spillover, it’s about the R&D, it’s about introducing the type of manufacturing culture we want to have. I think that all has unquantifiable value we would like to introduce into our economy.”
Abu Dhabi, he says, takes a long-term view. “We are patient, but we understand that the window of opportunity is not going to be open for ever. So if we’re going to do stuff, we should do it sooner rather than later.”
Because most of the big projects are still in the early implementation stage, observers say it is difficult to gauge which will succeed and which may fall by the wayside. Successful implementation will be the most daunting challenge.
“The telling time will be the next 24 months because some of these things should start to show,” another observer in the emirate says.
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