Dubai Big Brother Abu Dhabi Drives Spending on Museums Not Malls
Stock Chart for National Bank of Abu Dhabi PJSC (NBAD)
Less than 100 miles (160 kilometers) of the Persian Gulf coastline separates Dubai from Abu Dhabi, yet economically the cities are growing further apart.
As Dubai recovers from its slump caused by the global financial meltdown, Abu Dhabi is expanding faster, according to figures from their governments published last month. The difference now is that it’s not just because of petrodollars. Building projects and tourism mean the non-oil economy has overtaken Dubai’s entire output, the data showed.
“The recovery in Dubai grabs a lot more headlines, given how hard it was hit,” said Raza Agha, chief Middle East and Africa economist at VTB Capital in London. “The fact of the matter is that for the United Arab Emirates’s non-oil economy, Abu Dhabi’s non-oil sector is equally important.”
The emirate, whose grid-planned streets are lined with verdant gardens, is building branches of the Louvre and the Guggenheim museums to attract high-end businesses and visitors, leaving the expansive malls and media glitz to Dubai. Abu Dhabi, which bailed out its neighbor in 2009, is home to one of the biggest sovereign wealth funds, about 6 percent of the world’s proven oil reserves and the first gold-bar vending machine.
Abu Dhabi’s non-oil industries grew 7.7 percent in 2012 to 325 billion dirhams ($89 billion), the most since 2007, and make up about 48 percent of gross domestic product at constant prices, preliminary government data on June 19 show.
Doctor or Trader
“Abu Dhabi is the successful doctor in the family, a wealthy big brother, and Dubai is a successful young, hotshot trader with a cyclical income,” said Emad Mostaque, a London-based strategist at Noah Capital Markets EMEA Ltd. Abu Dhabi views itself “as high end,” he said. “They don’t want riffraff in their city.”
The emirate’s 678 billion-dirham economy accounts for more than half the U.A.E.’s 1.03 trillion-dirham GDP and more than double Dubai’s. Abu Dhabi expanded 5.6 percent in 2012 compared with 4.4 percent in Dubai, according to government data.
Stripping out the oil industry, Abu Dhabi’s GDP was 7 billion dirhams more than the 318 billion dirhams for Dubai as a whole, the reports show. Abu Dhabi cited growth in real estate, education and “professional, scientific and technical activities” among its economic drivers.
That’s not to say Abu Dhabi was immune to the global credit crisis. Property prices in the emirate declined by more than 50 percent since 2008, and its economy shrank 4.9 percent in 2009. While Abu Dhabi is expanding its international airport with a new terminal complex, its passenger traffic for the first four months of 2013 combined was less than Dubai’s (DUAPPT) in April.
Abu Dhabi plans to create a more sustainable economy by 2030. The city is surrounded by construction sites, including Saadiyat, a 27-square-kilometer (10.4 square-mile) development on an island and Yas Island, home to Ferrari World and the Yas Marina Circuit, where the Abu Dhabi Grand Prix is held.
The richest of the seven emirates and the national capital, Abu Dhabi said in January it would to spend 330 billion dirhams to fund development projects over five years.
“No doubt these allocations will have numerous positive consequences on the economic activities in terms of injecting new cash, stimulating growth and creating new jobs,” Mohamed Omar Abdulla, undersecretary in Abu Dhabi’s Department for Economic Development, said in an e-mailed response to questions on June 17. The investment program also affirms the emirate’s “effort to diversify its economic resources away from reliance on the oil and gas sector,” he said.
The emirate is building the world’s largest aluminum smelter, an international financial center, and opened the 26.5 billion-dirham Khalifa Port last year to rival Dubai’s Jebel Ali Port. The Abu Dhabi-based Etihad Airways PJSC, the third-biggest airline in the Persian Gulf, is expanding its network and plans to acquire a stake in Jet Airways India Ltd.
Dubai spent more than $100 billion to transform itself into a tourism and commercial hub and saw its economy shrink in 2009 after the global credit crisis tightened lending and ground the emirate’s construction and property industries to a halt.
Abu Dhabi extended a $20 billion lifeline that year to keep Dubai from defaulting on its debt. Dubai’s media office didn’t reply to emails and calls seeking comment.
Without significant oil revenue to lean on, Dubai relies on attracting people who want to spend. Its hotels and lavish brunches have led to headlines of couples arrested for allegedly having sex and kissing in public places. Abu Dhabi wants to disassociate itself from that lifestyle.
“Abu Dhabi is worried about the degeneration of the society, of the young Emiratis and their own culture,” Mostaque said. “They want Abu Dhabi to be a family-friendly place.”
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