• Home
• /
• Business

Paulson Praises UAE’s Economic Model: Report

DUBAI — US Treasury Secretary Henry Paulson has said that surging oil revenues present a historic opportunity for GCC countries to diversify their economies. His comments were made in an interview with the Oxford Business Group (OBG) for the ‘The Report: Abu Dhabi 2008’ published by OBG.

These revenues he said were helping to “shore up their economic fundamentals and make much needed investments in human capital – steps that should help avoid the up and down cycles of the past and support significant sector-wide growth.” He cited the UAE, “where a vibrant, diversified economy is reflected through innovative construction and services growth,” referring to projects like the carbon-neutral city and a new financial centre.

Such projects “are evidence of the benefits of outward-oriented policies and I hope they encourage other countries to follow suit.” Urging countries to resist a drift towards protectionism, “as economies change, uncertainty can create resistance to openness, it is critical to understand however that in the long run openness to trade and investment will not only bring prosperity but will also improve stability by better enabling economies to manage external shocks and smooth out business cycles.”

Assuring investors of open US markets he added, “some worry about growing protectionist sentiment in the US, my response is the same as that expressed by President Bush – as we seek to open new markets abroad so the US will keep its markets open at home to diverse foreign investment.”

The report added that Abu Dhabi’s GDP has been on the rise on the back of strong oil revenues with new investment in infrastructure, real estate, industry and tourism. However it said the energy sector continues to dominate the economy - providing 90 per cent of government revenues, 95 per cent of exports and 59 per cent of GDP.

In May 2008, the Department of Planning and Economy unveiled its five-year strategic plan designed to expand Abu Dhabi’s industrial base, boost GDP growth and attract foreign investment.

The government will spend an estimated $200bn on the new infrastructure needed to support the diversification programme over the coming five years the report added.

Major development projects are under way in the real estate sector as state-owned and mixed state-private real estate companies, such as Aldar and Sorouh are moving ahead with large-scale projects intended to add to the emirate’s attractions as a cultural, tourism and business destination.

While the private sector is being encouraged to take over the provision of public services, major government firms are looking to expand abroad. In November 2007 the Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund (SWF) helped Citibank cope with its credit crunch losses by extending a $7.5 billion loan in a deal that effectively gave the SWF a 4.9 per cent share – the largest single stake.

The high-profile deal focused attention on the growing strength of the world’s SWFs.

The report stated that TAQA, Etisalat and Mubadala have already bought substantial assets across a range of sectors in the US, Europe and Asia.

mark_townsend@khaleejtimes.com