Page 119 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

Silicon from Sand: Essential Background on the GCC 103

ECONOMIC TRANSFORMATION

Historically, the UAE’s core economic activities have been modest,
consisting mainly of pearl diving, fishing, and commodity trading
along its coasts, small-scale agriculture in the oases, and animal
herding in the vast deserts. Facilitating trade between the Arab
world and South Asia allowed many local merchants to accumulate
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wealth as brokers. As related to us by a senior Emirati business
leader, “seeing foreign faces [in the market] was a good sign”—it
meant business was strong. In the 1950s and 1960s, imports grew
more than tenfold, and Dubai became an increasingly important—
though regionally focused—trade center. 4
The UAE economy has changed radically, of course, since it
began exporting oil in 1962. The country possesses over 8 percent of
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the world’s proven oil reserves, almost all of which are controlled
by Abu Dhabi. In 2005, Dubai and Sharjah collectively exported
only 6 percent of the UAE’s oil. Total UAE oil exports were close to
$50 billion in 2005.
Oil income has affected the emirates differently. Abu Dhabi,
which controls nearly all the oil, became more firmly established as
the dominant emirate in the federation. The leadership of Abu Dhabi
is now—at least openly—beyond question. Abu Dhabi has also
become a huge exporter of capital, largely through the Abu Dhabi
Investment Authority (ADIA). ADIA guards its secrets carefully, but
expert observers have estimated its assets under management to be
at least $250 billion. According to the Oxford Business Group, only
one institutional investor—the Bank of Japan, the nation’s central
bank—has more assets. Although ADIA’s investment philosophy is
quite conservative, its portfolio continues to grow at a healthy pace,
and the institution is strong due largely to the expertise of the world-
class management team it has assembled through global recruiting.
Investment managers from around the world come to ADIA with
their proposals, seeking funding from this blue-chip institution. In a
recent article, a senior executive from a leading global bank con-
fessed that ADIA was one of very few institutions that the bank’s
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CEO would visit at the drop of a hat. Without a doubt, ADIA is one
of the most important investors in the world.
Dubai’s prosperity, however, is linked less directly to oil. In
fact, oil revenues contribute less than 10 percent of the emirate’s