January 15, 2013
Following the announcement at the end of last year from the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, that the emirate was to build what it called a new city within its borders, the Government of neighbouring Abu Dhabi has announced that it plans to spend around £56bn on capital projects over the next five years as it seeks to restructure its economy to reduce its reliance on the oil and gas industry. Abu Dhabi is the largest emirate state and its investment marks a significant shift in the economic focus of the region.
Although most developments in the Middle east generally come with some fanfare about their costs and scale, the new city in Dubai is as yet uncosted. They may be coy about the finances, less so about the name of the project. Mohammed Bin Rashid City is an enormous mixed use development consisting of four main elements. As well as business and innovation centres, the new city aims to attract some 35 million visitors a year to its array of tourist attractions, hotels, shops (including the largest shopping mall in the world obviously) and cultural attractions.
Not to be outdone, the government of Abu Dhabi this week announced a huge programme of investment over the next five years covering schools, healthcare, roads, housing and other public infrastructure. The programme of work will also establish tax-free enterprise hot-spots to attract a range of businesses and business sectors to the emirate. The Government said that the plans were ‘in line with the Abu Dhabi policy to diversify its economic resources and reduce dependence on oil and gas revenues’.
They can certainly afford it as government spending tracks oil revenues which increased from £29 billion in 2010 to £44 billion in 2011. In the same period, Government spending increased by 20 per cent to £53 billion.
At the same time, the Government of Saudi Arabia announced over the New Year an expansionary budget, raising spending by 19 per cent in 2013 to $219bn, around three times higher than the growth in GDP last year, as it sought to stimulate the economy and investment.