Dubai and Gwadar: the silent economic war in the Gulf of Oman

[UnitedPak]

The expansion of Gwadar port in Pakistan is a game-changing venture that would reformulate the economic agenda of the entire region.


A free zone co-built with China in construction at the Gwadar port in Pakistan. Picture by Xinhua/Sipa USA. All rights reserved.


Many economic analysts believe that Gwadar is another Dubai emerging on the world’s map. The controversial issue here is that an economically powerful Gwadar threatens the strategic influence of Dubai in the region. This challenging point, recently, has caused a silent economic war in the Gulf of Oman between two groups of countries. Pakistan, China and Qatar on one side. India and the UAE on the other.

Dubai is located on the southeast coast of the Persian Gulf. It is the largest and most populous city in the United Arab Emirates (UAE). Dubai has invested in infrastructure to overcome its poor natural resources and become a global business, trade and tourism hub. Thus, Dubai has emerged as a multi-cultural city and enjoys to receive millions of leisure and business visitors each year from around the world.

The major revenue of Dubai comes from tourism, aviation, real estate, and financial services. Large construction projects, iconic skyscrapers and sports events are other means of income for Dubai. The world’s tallest building called the Burj Khalifa is located in this emirate.

It is clear that the area where Dubai is located can offer a distinct geographical advantage to businesses. There are two major commercial ports in Dubai, Port Rashid and Port Jebel Ali. The latter one is the biggest man-made harbor in the world and the biggest Middle East port. It is home to over 5,000 companies from 120 countries.

However, Gwadar port is a serious rival to Dubai. Gwadar port is considered a strategic location, giving China and Central Asia access to the Gulf region and the Middle East. Gwadar port will become the main sea gate for Central Asia. It will also become easier to send products from Xinjiang and central Asian countries to other regions. “The corridor will help reduce transport time for goods from Gwadar port to western China and central Asian regions by about 60 or 70 per cent,” Vice Premier of China Ms Liu Yandong said.

On 10 April 2016, talking to The Washington Post, Zhang Baozhong, chairman of China Overseas Port Holding Company said that his company could spend a total of $4.5 billion on roads, power, hotels and other infrastructure for the industrial zone of Gwadar. He also added that the company also plans to build an international airport and power plant for Gwadar.

‘Dubai Investment Forum’, a platform aiming to persuade local and international investors will be held in October under the patronage of Crown Prince of Dubai Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum. Undoubtedly, this Forum is so crucial for the future of Dubai to continue its development as now it has a strong rival named Gwadar.

India is another key player in this regional battle. The Chabahar-Gwadar adversary is due to the fact that the ports are at a distance of about 72 km from each other. Both India and Pakistan have been attempting to undermine each other in the region and the development of the two ports is bound to add to the animosity.

America’s relations with India should also be seen in this context. Recent agreements signed between the US and India validate the fact that a rising China is a threat to the regional balance of power. The US is also concerned about the rise of Chinese economic power in the region. Dr. Ahmed Albanna, UAE Ambassador to India declared that China’s investment for expanding Gwadar port in Pakistan will have negative impact on the UAE’s interests.

Qatar officials understand the importance of Gwadar as a great game-changer in the region and they planned to invest 15% of the “China–Pakistan Economic Corridor” (CPEC), a collection of infrastructure projects that are currently under construction throughout Pakistan, so that to put pressure on Dubai and the UAE as the animosity between the two country has recently became more harsh.

To sum up, the geoeconomic and geopolitical situation in South Asia is changing swiftly. This can be credited to the fact that the emerging powers in the region are redefining their presence. China, Pakistan and Qatar are formulating the economic agenda of the region based on the geo-economics of Gwadar port while India and the UAE are strongly against this prospect and attempt to thwart their plan by persuading the USA and European countries to invest in Dubai.

Saudi Arabia and Kuwait have natural oil resources and Qatar has natural gas resources but the UAE has no special resources and is mostly dependent on its tourism and transportation revenues. Thus, with regard to the large investment by Saudi Arabia for attracting tourism by turning 50 Red Sea islands into luxury tourism resorts and the silent economic war in the Gulf of Oman, the UAE is the big loser of the this great game since Dubai will have no tourism and transportation privileges ten years from now.


https://www.opendemocracy.net/north...nd-gwadar-silent-economic-war-in-gulf-of-oman

 

[The SC]

"Saudi Arabia and Kuwait have natural oil resources and Qatar has natural gas resources but the UAE has no special resources and is mostly dependent on its tourism and transportation revenues"

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Abu Dhabi's oil reserves to last another 150 years

Oil-rich Abu Dhabi is on a strong growth trajectory and the emirate will remain in a strong economic position in the future, too, after having weathered the economic downturn considerably well.

The figures quoted in a new report by Isthmus Partners 'Abu Dhabi Investment Environment', shows that with 33 per cent of the country's population, the emirate contributes around 60 per cent to the UAE's GDP and has a GDP per capita of 1.8 times the national average.

"Abu Dhabi has one of the highest GDP per capita in the world. Even on a standalone basis, Abu Dhabi would be the second-largest economy in the GCC after Saudi Arabia," said the authors of the report stressing the economic clout of the capital city.

The emirate is blessed with 95 per cent of the UAE's proven oil reserves and 92 per cent of UAE's gas reserves. Based on current utilisation rates and no additional discoveries, Abu Dhabi's oil reserves will last for 150 years, said the report.

According to the IMF estimates, the UAE produced 2.62 million barrels of crude oil per day on average in H1 2008, 97 per cent of which was produced in Abu Dhabi.

As a result, oil exports generate significant income for the emirate.

In 2008, export revenue from oil and gas was Dh376.9 billion, but in 2009 this figure was reduced to Dh208.5bn due to the drop in the price of oil and the global economic recession.

With good revenues coming from the hydrocarbons, Abu Dhabi is also trying to diversify its economy.

"The government has intensified the diversification efforts in recent years capitalising on the 2000s oil boom and the increased inflows of foreign investment," said the report, adding that the "emirate's strategy is to capitalise on the strong hydrocarbon sector and grow into other industrial sectors as well as tourism and aviation".

The emirate is also home to one of the world's leading sovereign wealth funds, Abu Dhabi Investment Authority, which is a strategic international investor.

The report said: "Although official figures on assets under management are not forthcoming, it is considered that the Abu Dhabi Investment Authority (Adia) and Abu Dhabi Investment Council (Adic) hold hundreds of billions of dollars of investments. According to the IMF, the UAE held an international investment position (IIP) with net assets of $305 billion (Dh1.1 trillion) of international assets in 2009 and the great majority of them are owned by Abu Dhabi entities.

The ratio of IIP net assets over UAE's GDP is 132 per cent, compared to 105 per cent for Singapore and 52 per cent for Norway."

Abu Dhabi has traditionally invested a considerable amount of its oil revenues abroad and such international investments provide a significant source of income to the Abu Dhabi Government and reduce the volatility of the emirate's GDP and dependence on oil prices, said the authors of the report.

Exports of oil and gas brought $102.7bn to the UAE in 2008 and a projected $56.8bn and $71.8bn in 2009 and 2010 respectively, according to the IMF, as quoted in the report. The year 2008, which was probably one of the best in terms of economic growth, saw the UAE's consolidated fiscal surplus reach a record high of Dh127bn due to strong oil and non-oil revenue, even though consolidated government expenditure increased to a record of Dh198bn, as per the data in the report.

"The UAE reported fiscal surpluses for four consecutive years from 2005-2008 (while previously it had several years of fiscal deficits due to low oil prices and a steady growth in public spending and infrastructure).

"A small fiscal deficit of 0.3 per cent of GDP is predicted for 2009 due to lower oil prices and an expansionary fiscal policy by Abu Dhabi to counteract the economic slowdown. The IMF forecasts that the UAE will report a surplus in 2010."

Given the economic growth, Abu Dhabi's population has increased rapidly in recent years, primarily through immigration of expatriates. "Resident population grew by a compounded average of 4.6 per cent annually between 2001 and 2006. Between 2005 and 2008, the emirate grew at a faster annual rate of six to seven per cent. Anecdotal evidence suggests that the population increased mildly in 2009 and 2010, as Abu Dhabi remains a net employer."

In recent developments, Abu Dhabi was also hit by the global credit crunch.

"The oil growth engine (centred in Abu Dhabi) and the non-oil growth engine (centred in Dubai) were hit at the same time driving the country into mild negative real GDP growth in 2009, forecast at –0.7 per cent by the IMF."

However, it was a softer landing. "Though at the beginning of the financial crisis many participants expected that Abu Dhabi could be immune to shocks, the reality is that the crisis has affected Abu Dhabi though to a smaller degree.

"In the real estate sector, Abu Dhabi has expanded more conservatively and has a better match of demand with supply. In many segments of the property market, Abu Dhabi is still undersupplied. Yet the UAE's capital experienced a reduction in real estate prices in 2009. Prices in prime residential properties have fallen 40 per cent between Q3 2008 and Q3 2009," said Colliers.

Rental levels have fallen by an average 18 per cent in the first three months of 2009, but had previously increased by 14 per cent in Q4 2008.

"Occupancy rates in Abu Dhabi are almost 100 per cent and supply of completed property (rather than off-plan) cannot satisfy demand. Yet rental prices have been dropping since Southern Dubai has emerged as a substitute to Abu Dhabi."

As far as the banking sector is concerned, the central government has moved proactively in easing the liquidity problem and restoring confidence in the system.

Other sectors of Abu Dhabi's economy are performing well. The return of oil prices to the $70-$80 a barrel level has boosted oil revenues. "Industrial demand and revenues have fallen due to the slowdown in global activity and local construction, but investments in this sector continue.

"Abu Dhabi will capitalise by increased industrial export revenues once the global economy resumes expansion. In the meanwhile, the emirate benefits from carrying out its infrastructure investments at reduced cost due to the drop in the price of construction materials and labour costs."

Abu Dhabi has also indicated that the government and the emirate will continue supporting troubled government-related entities given that they are sustainable businesses, the report points out.

With a GDP of Dh520bn in 2008, the emirate is a strong economy. Yet, Abu Dhabi is one of the most concentrated economies in the GCC, as the oil sector dominates economic output and any major fluctuations in oil price can impact it.

Thus, diversification is in a major way and the emirate has invested large amounts of capital in broadening the economic base.

"Abu Dhabi has intensified efforts embracing the two pillars of diversification and privatisation, introducing strategic measures and undertaking substantial new investments in industry, real estate, tourism, aviation and other sectors.

"Abu Dhabi targets an annual growth of 7.5 per cent. The emirate published in 2009 the 'Abu Dhabi Economic Vision 2030' outlining its economic priorities for the coming years and its policies over the next two decades to achieve its goals.

"The plan envisages a population of 3.1 million by 2030, an 80 per cent increase from an estimated 1.7 million people in 2009," it said.

"Abu Dhabi's aim is to stimulate non-oil sectors rather than to reduce activity in the oil sector. It is increasing its industrial base [petrochemicals, plastics, metals] capitalising on the availability of resources.

In addition, it is looking to boost tourism and aviation sectors amongst others.

Abu Dhabi aims to become industrial and manufacturing hub

On sector analysis of the Abu Dhabi economy, the Abu Dhabi Investment Environment report highlights that Abu Dhabi aims to become the Middle East hub for industrial and manufacturing companies seeking to capitalise on the numerous opportunities that the emerging economies of the region offer.

"The government envisages exploiting the emirate's competitive advantage in the energy sector and command a larger share of the hydrocarbons value chain.

"According to the Abu Dhabi Chamber of Commerce, investments in industrial projects reached Dh39.8 billion in 2008."

The construction sector is another important one to watch out for. It contributed Dh21bn to Abu Dhabi's GDP in 2008. Construction activity is still strong as there are massive infrastructure projects under development. Growth in real estate construction has slowed down but fundamentals are good, said the report.

"There are massive government or government-related investments in shipyard, seaport, airport expansions, healthcare, education, major road upgrades and transportation.

"Infrastructure investment makes up a significant and growing proportion of construction activity for Abu Dhabi and the GCC," it said.

Developments in transport are also commendable. Abu Dhabi's new port is under construction and will include one of the world's largest industrial zones.

The emirate has also undertaken a massive expansion project for its main airport.

Aerospace and defence are also important pillars for Abu Dhabi's diversification plans.

"In the third quarter of 2009, Mubadala announced that it had signed a long-term strategic aerospace agreement with Boeing to develop mutually beneficial initiatives in various areas including composite manufacturing, engineering, R&D, commercial maintenance, repair and overhaul, military maintenance and sustainment, and pilot training.

"In the first quarter of 2009, Mubadala had announced that it is in the initial stages of forming a joint venture with the United States company Sikorsky Aerospace Services in order to develop a military-aviation maintenance centre," the report said. Abu Dhabi is also investing considerably in the tourism sector as a means of diversification.

The city has been developing specialised economic zones in strategic locations to attract investments.

The emirate has launched huge projects to diversify its economy.

http://www.emirates247.com/eb247/ec...to-last-another-150-years-2010-03-31-1.100837

 

[MultaniGuy]

I doubt Gwadar is going to compete with Dubai.

 

[Incog_nito]

China will not going to back off.

 

[Hakikat ve Hikmet]

Don't omit Turkey from the mix!!!!!

 

[wiseone2]

gwadar cannot compete with dubai in certain areas