GRM 2010 GRM 2011

Abstract Details

Family Name:
First Name:
Title of Paper:
Achieving Abu Dhabi’s Vision 2030: Unraveling Constraints to Economic Growth
Paper Proposal Text :
UAE economic sustainability is defined as the capability to maintain the high level of income way beyond the day when the last barrel of oil leaves the shore of the UAE. Thus, when the UAE exhausts its oil reserves, the hope is to have other sources of income that will help sustain the country. Hence in this pursuit for sustainability, it is widely accepted that the Economic Vision 2030 has set the foundation on a new phase of development for the Emirate Abu Dhabi. Furthermore, it is a document of high importance to the UAE as a whole, not only because it consists of Abu Dhabi’s vision for its contribution to the federation, but also because of Abu Dhabi’s major role in supporting the development plans of the UAE. Abu Dhabi’s success in achieving the goals of Vision 2030 is an essential component of achieving UAE national interests and security.
The purpose of this paper is to analyze how the UAE measures its success in achieving its policies toward economic sustainability. Since the first 5-year period of the Vision 2030 has already passed, it is sensible to review progress of efforts in order to help us know where we are from the vision’s goals. There are two main areas to consider when evaluating Abu Dhabi’s effectiveness in achieving economic sustainability. First, there have been unwavering fiscal and financial commitments from Abu Dhabi’s government as shown by its expansionary budgetary policies even during the financial crisis years of 2008 and 2009. Was the money well spent? Second, Abu Dhabi, during the past five years, initiated a number of monumental and strategic projects in major sectors of the economy mainly in tourism, heavy industries, and real-estate. Also, Abu Dhabi has engaged in transformational projects such as a peaceful nuclear energy program, Masdar City for renewable energy, cross-country Etihad rail project, Khalifa Port, and Khalifa Industrial Zone for Development, KiZAD. How much have projects contributed to sustainability?
As for government policies and business environment, Abu Dhabi with the UAE rose through the ranks of the World Bank’s “Ease of Doing Business”: the Abu Dhabi Business Center project was instrumental in that aspect. Moreover, Abu Dhabi boosted support for small and medium enterprises, or SMEs, with further financial injections into the Khalifa Fund for Enterprise Development, and introduced legislation that allocates 10% of government purchases to SMEs.
As for the results drawn from Abu Dhabi’s efforts, the oil and non-oil GDP statistics have increased at both current and constant prices with formidable growth rates considering the 2009 financial crisis. Moreover, during the same period the current income per capita and non-oil sector’s share of the GDP have both increased.
However a deeper look into the results shows that Abu Dhabi is not doing so well at achieving Vision 2030’s targets. At constant prices, the GDP per capita for both oil and non-oil GDP have actually slightly dropped. Furthermore, the economy as a whole remains significantly sensitive to fluctuations in oil prices. Therefore, the trend observed is contrary to the previous paragraph. In other words, Abu Dhabi economy as whole still heavily impacted by the oil sector.
After looking at the divergence from anticipated Vision 2030’s high level targets, some might reasonably conclude that in the past five years Abu Dhabi was literally going away from the vision and not toward it. However, reasonably also, some may say that the past five performance results are due to extraordinary circumstances imposed from the impact of the financial crises of 2008 and 2009. Nevertheless, externalizing the problem may be not helpful, because it diverts the attention away from possibly inherent issues with how the vision is being achieved and leave them unattended.
I hypothesize that the effort toward Vision 2030 is not realizing its full potential because there are binding constraints that were not appropriately managed in order achieve economic sustainability.
This paper attempts to unravel constraints using the growth-diagnostics methodology outlined by Hausmann, Rodrik, and Velasco (HRV). From the analysis I will synthesize a coherent narrative for these constraints and put them in the context of how the UAE can better evaluate its sustainability policies.