World Economy

Abu Dhabi Strives to Diversify Economy

Abu Dhabi Strives to Diversify Economy Abu Dhabi Strives to Diversify Economy

As Persian Gulf economies take stock of continuing oil price turbulence, the Abu Dhabi government has been keen to boost investments in the industrial and petrochemical sector to diversify income from fossil-fuel energy.

From petrochemical projects to defense industries, the UAE has made strides in becoming one of the most non-oil dependent economies in the region, NewsNow reported.

“The UAE is one of the most diversified economies of the region and ranks favorably on competitiveness indicators,” the IMF says. “Structural reforms should aim at further diversifying the economy and accelerating private sector-led job creation for nationals.”

The industrialization efforts are part of Abu Dhabi’s 2030 Vision, which counts on non-oil industries to play a significant role in supporting the economy.

As part of the vision, contribution of the non-oil sector is aimed to be 64% of GDP. In 2013, non-oil activities contributed 45% to the emirate’s GDP, versus 43% in 2012, according to the Economic Report of Abu Dhabi 2014.

The manufacturing industries sector in Abu Dhabi accounted for 12.6% of the emirate’s non-oil GDP in 2013. The petrochemicals and plastics sector remains the top manufacturing sector, accounting for about 50% of the manufacturing industries’ production and 73% of its fixed capital formation. It is followed by the basic metal industries (iron and aluminum), which account for 11% of the production value of manufacturing industries sector.

“Dubai has been traditionally the leader of the diversification effort, but Abu Dhabi has found its own competitive niches in different segments and it is natural to focus on the non-oil sector in the current period of low oil prices,” says Razan Nasser, a senior economist at HSBC Middle East.

For example, the plastics firm Borouge plans to reach a petrochemical production capacity of 4.5 million tons a year by 2016 as the country’s biggest petchems producer undertakes a $4.5 billion expansion despite the oil price rout. Borouge 3, which had an initial start last year, will increase output to four million tons of petrochemicals a year by the end of this year from the current level of more than two million tons per year. Abu Dhabi-based Borouge is a joint venture between state-run energy firm Abu Dhabi National Oil Company and Austria’s petrochemical company Borealis.

All of these expansion projects at EGA, which reached a capacity of 2.4 million tons per year last year, are part of plans to become the fourth-largest aluminum producer globally in the next two to three years.