‘It’s in Abu Dhabi – that place with all the oil…’ It was a throwaway comment made recently by Pamela Anderson. She was talking about plans for a new environmentally friendly hotel in Abu Dhabi which bears her name, but it raises an interesting question. What will Abu Dhabi be when the oil runs out? That place with all the dates? It’s a question guaranteed to give even the wealthiest of oil-soaked nations sleepless nights. It has certainly entered the thoughts of Abu Dhabi’s ruling elite.
Like some sparkling debutante, the capital currently commands the world’s attention with the merest flick of its jet black hair. If money talks, then Abu Dhabi is practically gabbling. According to ADNOC, the UAE produces 2.7 million barrels of oil a day – an estimated 90-95 per cent of this comes from Abu Dhabi. To put this into perspective, business analysts have estimated that every time the price of oil goes up US$1 per barrel, Abu Dhabi benefits to the tune of US$500 million a year – the price currently stands at around US$104 per barrel.
But what happens 90 years down the line when its charms fade? What happens when its oil-black hair turns the colour of the white desert sands? The UAE is home to an estimated 10 per cent of the world’s oil reserves; its next biggest natural resource, dates, are not exactly in the same economic league. What then?
For the answer, we begin in late-Victorian Manchester, where Anna Connell, a young English clergyman’s daughter, is setting up a number of sporting clubs to distract the city’s male working class population from their favourite pastime: getting drunk and beating each other into a stupor. Over 100 years later, the Abu Dhabi Group for Investment and Development (ADUG) paid an estimated US$200 million to Thaksin Shinawatra, the deposed Thai Prime Minister, for the majority share in one of these clubs – Manchester City. The rest, as they say, is history.
To quote the famed English football pundit Jimmy Greaves: ‘Football, it’s a funny old game.’ Naturally headlines followed, as did GBP£32.5 million-worth of Brazilian footballer in the form of Robinho, and wild stories (since dismissed) of a further GBP£130m set aside to buy Cristiano Ronaldo. All of which has been reported to death.
Far more interesting is the speculation as to why. Yes, the Man City buyout was not, as was initially speculated, made by the Abu Dhabi Investment Company (ADIC), the investment wing of the government, but a group of independent businessmen headed by Sheikh Mansour bin Zayed Al Nahyan (Minister of Presidential Affairs) and fronted by chief executive of Hydra Properties, Dr Sulaiman Al Fahim. However, it is far more than just a trophy. It remains very much in line with the emirate’s current attitude towards foreign investment.
The Abu Dhabi Investment Authority (ADIA), sister group to the ADIC, is reported to be sitting on an investment fund worth US$1 trillion. With the West currently experiencing a credit crunch (arguably partly fuelled by the rise in oil prices), Abu Dhabi’s petrol dollars are being welcomed like never before, and the city has hit the headlines with a series of high profile investments.
In July, ADIC paid US$800 million for a 90 per cent share of New York’s iconic Chrysler Building. Last year, the ADIA grabbed a 4.9 per cent share in Citigroup, the world’s biggest bank. In May, Abu Dhabi Commercial Bank grabbed a 25 per cent share of Malaysia’s fourth largest lender, RHB Capital. Elsewhere, another Abu Dhabi investment fund owned by the Nahyan family, the Mubadala Development Company (MDC), established a 7.5 per cent share in American equity company Carlyle Group and a 5 per cent stake in Ferrari. Even more significant was the US$8 billion they paid out for a 10 per cent share in General Electric – a rising power in the Middle East. Each investment has been a calculated step toward diversifying Abu Dhabi’s economy.
There is an obvious discrepancy here. Man City does not exactly have the economic pedigree of, say, General Electric. Perennial underachievers on the pitch, off it they are hardly a shrewd bet for a profit. Debt management, spiralling transfers fees and time spent establishing foreign markets will mean a huge outlay and few guarantees, although thanks to the global appeal of football, not to mention the Premier League’s US$4.8 billion domestic and international broadcast deal (exporting games to over 200 countries), it has created a huge amount of interest and publicity for the emirate. What’s more, it will continue to do so if ANUG makes good on its claim to turn Man City into the biggest football club in the world. Is this the key?
The Man City deal fits in with a general investment trend calculated to raise the profile of the emirate through media and sport. MDC is a prime example. As well as holding stakes in heavy industry, telecommunications, infrastructure and aerospace, it has also cornered the market in pop music, having engineered deals to bring headline-grabbing acts like Elton John, Justin Timberlake, Bon Jovi and now Christina Aguilera to the capital at great expense. Speculation as to the financial return on these 17,000 capacity gigs is just that, but it will once again put Abu Dhabi in a spotlight more used to shining on neighbours Dubai.
Another key development is the building of the new Yas Island F1 track and Ferrari Theme Park (eased by MDC’s share in Ferrari). Crucial to this was the securing of a seven-year deal to host the Abu Dhabi Grand Prix. Speaking to Bernie Ecclestone last month, he was quick to put his finger on the button. ‘Nobody has really known anything about [Abu Dhabi] and now suddenly they have part of a World Championship that is spread throughout the world.’ The same could be said about the forthcoming Saadiyat Island Beach Golf Course, the Guggenheim Museum, the Louvre gallery and the Performing Arts Centre – each one calculated to grab the world’s attention and keep it.
Also of interest was the recent announcement of a US$1 billion fund pledged toward backing feature films and digital content. Called imagenation, it is distributed as part of the Abu Dhabi Media Company (ADMC) and has vowed to team up with Hollywood to develop content for both global and Arabic language markets. Naturally, the US remains one of the few countries immune to the charms of soccer (just ask David Beckham), so where better to target than Tinseltown. Meanwhile, ADMC’s Getmo media download service is already out to dominate the Middle East, Asia and Africa download market, and just recently we saw the launch of Abu Dhabi TV Plus One, in a bid to combat time differences in the Middle East.
In short, Abu Dhabi is on a major charm offensive. It wants to let the world know it’s there. At the same time it is accruing some major investments and shifting its economic focus slowly away from oil. The aims are the same – independence. Instead of being ‘Abu Dhabi – that place will all the oil,’ it wants to be ‘Abu Dhabi – that place with all the sport and culture.’ Plan Abu Dhabi 2030, the capital’s urban restructuring plan, is changing the physical landscape of the city to accommodate its projected expanse, but its economic plan is looking much further ahead. Regardless of Man City’s performance at their brilliantly dubbed ‘Middle Eastlands’ stadium, Abu Dhabi has made a powerful statement that reads: we have more to offer than just oil.
