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ViewpointDecember 31 2021

Mohammed Ali Al Shorafa: Abu Dhabi's open for business

Abu Dhabi's goals will be realised through pivoting the economy towards technologies and new economic sectors, says the chairman of the Abu Dhabi Department of Economic Development.
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Mohammed Ali Al Shorafa: Abu Dhabi's open for business

Abu Dhabi is both the capital city and largest emirate in the UAE, the Middle East’s third-largest oil producer. After posting a gross domestic product deficit of 4.7% in 2020, Abu Dhabi expects a fiscal surplus of 1.6% in 2021, following a recovery in oil revenues.

The emirate has long sought to diversify its economy to lessen its reliance on oil revenues, investing in manufacturing and service economies while lowering barriers to foreign investment. In 2021, several high-profile state assets, most notably the drilling arm of the Abu Dhabi National Oil Company (Adnoc), were listed on the Abu Dhabi Securities Exchange (ADX), in a watershed year for local capital markets.

Mohammed Ali Al Shorafa is chairman of the Abu Dhabi Department of Economic Development (ADDED) and chairman of the Abu Dhabi Investment Office.

Q: How has the Covid-19 pandemic impacted Abu Dhabi’s economy over the past 18 months and what is the outlook moving forwards?

A: Covid-19 has had a tremendous impact worldwide. Abu Dhabi’s quick, proactive measures to provide businesses the required support ensured the emirate was able to adapt to the global slowdown.

We announced 16 wide-ranging initiatives to support Abu Dhabi's private sector, especially start-ups and small and medium-sized enterprises (SMEs), under the ‘Ghadan21’ accelerator programme. These included a partnership between the Department of Finance and major banks to provide greater access to capital, suspension of bid bonds, exemptions on fees and more. Across Abu Dhabi, other business and government entities also launched initiatives to minimise the impact of the pandemic on the business community.

We also doubled down on our initiatives to attract investors to the city. The Abu Dhabi Investment Office offered incentives and investor care services to encourage businesses from around the world to set up in the emirate. Abu Dhabi’s handling of the pandemic demonstrates its commitment to supporting businesses, which helped to increase investor confidence and, as a result, we saw foreign investment into the UAE increase, despite the global slowdown.

Abu Dhabi’s economy is on track to grow by 6–8% over the next two years. As the world emerges from lockdowns, Abu Dhabi’s message is one of openness and growth. We are ready to welcome the world and help make our ambitions a reality.

Q: What are ADDED’s policy priorities for 2022?

A: ADDED, together with other Abu Dhabi government entities, has been working hard to develop the emirate’s economic planning and strategy. Our mission is to help deliver the city’s economic goals by coordinating and engaging with stakeholders on strategic development plans.

We have undertaken major advances at ADDED to align with this mandate. For example, we have made it a priority for ADDED to set the narrative of economics in Abu Dhabi through the provision of high quality data and reports on the economy. Added will continue to improve the quality of Abu Dhabi’s economic reports, as well as other reports covering key sectors of the local economy. We are also aligning and coordinating all the various economic actors in Abu Dhabi to work in unity for economic diversification and the transition towards an innovative, knowledge-based economy.

For 2022, the priority is to ensure that the recovery is sustained. Although many of the key economic indicators we track point to ‘green shoots’ in the economy, we will continue to implement policy responses during a developing situation. We have taken a calibrated approach to tapering support provided to the economy, but continue to closely monitor all sectors of the economy to ensure the recovery remains steady.

Looking beyond, we will continue to support Abu Dhabi’s robust and resilient economy in the new post-pandemic era. This means pivoting the economy towards technologies, practices and behaviours, and sectors that will be at the heart of the new economy. Moreover, the pandemic has taught us all the need to be prepared for unexpected shocks, and of the importance of global coordination in dealing with and finding whole-of-approach solutions to issues that span the economy, society, health and politics. 

Q: There was a flurry of privatisations and new listings on ADX in 2021. What is set to be privatised in 2022?

A: The increase in new listings and initial public offerings (IPOs) on ADX reflects the Abu Dhabi government’s commitment to supporting the economy by nurturing the private sector, and creating a dynamic and diversified investment environment.

ADX’s forward-looking ‘ADX One’ strategy, announced in January 2021, has also played a key role in developing the emirate’s capital markets. As part of the goal of doubling market capitalisation, the exchange has encouraged the listing pipeline to increase market liquidity and further improve market efficiency. The strategy is also focusing on attracting more local and international investors by bringing a range of innovative products and services to market at competitive price. Over the past year, ADX has introduced market makers, covered short-selling, improved securities lending, and granted more short-term margin licenses to brokerages. The exchange has also reduced commission fees twice in two years and recently extended trading hours.

[ADX's] benchmark index exceeded the 7800-point mark for the first time, making it one of the best-performing equity indexes in the world this year

This has delivered results, producing a deeper and more dynamic market with greater diversification and liquidity. Following the successful IPOs of Mubadala-owned Yahsat in July 2021 and Adnoc Drilling in October, the exchange’s market capitalisation has grown tremendously. At the same time, its benchmark index exceeded the 7800-point mark for the first time, making it one of the best-performing equity indexes in the world this year. We expect that the momentum will continue, due to the improved market liquidity, creating a virtuous circle that will attract more issuers and investors. The pipeline of IPOs is strong and will offer investors access to unique and sustainable growth opportunities in a diverse range of industries.

The Abu Dhabi government recently launched the Abu Dhabi IPO Fund as part of efforts to further enhance the emirate’s capital markets and strengthen ADX’s position as a leading stock market in the region. The Dh5bn ($1.36bn) fund will invest in five to 10 private companies per year, with a focus on SMEs.

In the meantime, ADX continues to invest in technology to make trading more efficient and enhance the customer experience. ADX’s trading platform and mobile app are being upgraded to provide market participants with a more seamless experience. The exchange also sealed an agreement with Nasdaq in September 2021 to put in place marketplace technology solutions ahead of an expected launch of trading in single stock futures on the exchange’s derivatives platform in the fourth quarter of this year.

Q: Are there likely to be further high-profile mergers across the Abu Dhabi economy in the coming year?

A: The wave of consolidations in Abu Dhabi helped to build economies of scale in the emirate’s operational, research and development capabilities. The combined synergies are creating far-reaching value across fields such as financial services, energy and engineering.

Mergers are a healthy part of any economy, but we cannot speculate on potential future mergers.

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