Asset Abu Dhabi - The Economic Transformation of the Middle East

foreign [Music] it's a pleasure for me to be with you what I'm going to do in this short presentation is take you through the Journey I've called it the GCC Rising Falcons it's about 30 years that took this part of the world from an empty desert to the wonders of space that's what's on our agenda I want to go through what happened what are the main elements that drove this economic development of the GCC Falcons and I'm going to talk about economic diversification 2.0 which we're now entering into third I'm going to develop a concept of regionalized globalization with the GCC countries and particularly the Falcons playing more and more of a regional role and expanding their footprint and finally I'm going to look at the opportunities for finance which is why all of us are here and how Finance can fuel an economic transformation but let's look at where we were and how did this happen first thing that happened is that the GCC became incredible increasingly integrated into Global architecture economic and financial architecture they have a vision towards where the gulf economies are going but they built it on massive infrastructure when you invest heavily in infrastructure you can transform your economic geography and they have done so massive quality infrastructure and you've experienced it as you've come into to Abu Dhabi and the UAE fast growing populations fast-growing economic growth but at the same time they've maintained macroeconomic stability and I'll look at some of the numbers in a minute and this is despite Global and Regional crises accumulation of wealth more than three trillion dollars worth are now invested internationally through the IFC student International Financial Centers and The Sovereign wealth funds and over the next three years 2023-2026 we're expecting 1.1 trillion to be added to the reserves of The Sovereign wealth funds and the economies of the region so you're talking about more than four trillion dollars available but already you've got National resource wealth more than 30 percent of the world's oil and gas is in this part of the world in the GCC and more than 30 percent of the trade and they're highly rated and of course the financial markets are now fueling a transformation of the region which we'll get into snapshot I won't spend too much time on it but that'll give you a snapshot from 20 2000 to 2018 the past few years covid in 2020 but look at how the GCC UAE in Saudi recovered from covet very rapidly compared to the rest of the world what does that show it showed that the health system the public health system was resilient you have hundred percent vaccination rates now in the UAE that's incomparable to the rest of the world so as I project forward these are our projections for the main macroeconomic indicators GDP inflation current account fiscal balances I'm expecting Saudi and the USD to have higher rates than what they had over 2000 2018. what we're talking about is five and a half four and a half to five and a half percent average growth so it's no longer going to be dependent on oil and gas that is the central message that I'm going to come through and if you look at fiscal balances the countries of the region have introduced vat they've Diversified sources of revenue and they're expected to save more than 30 percent of the new oil revenues that they're going to be coming in the years to come so they build up their fiscal buffers so whatever crisis you might have you have the fiscal buffer to protect you from that the same is true for current account balances so what are the diversification stages that we've gone through in the first one in the initial phase you had the oil wealth you created Sovereign wealth funds you did not misspend the oil wealth many countries in the world have natural resources and oil look at some countries in Africa but they have misspent it it did not go to Economic Development it did not go to building assets here assets were built up and particularly your infrastructure this helped transform the economies so you went into diversification phase which attracted a lot of people from the rest of the world you built up the infrastructure transport Logistics you went into Services tourism manufacturing industry and away from just the oil sector the special economic zones were an economic tool that played a very important role because it attracted FDI it attracted resources from the rest of the world and got increasingly integrated into the local economy but also as was just pointed out a bit earlier there's been liberalization the rights of establishment lowering the cost of doing business to attract people and Investments and finally within the Sovereign within the special economic zones which played a very important role in clustering the International Financial Centers now and this is extremely important remember that we always used to send our wealth to be invested somewhere else to be managed somewhere else in New York London Zurich and somewhere else for once in our history we have the ability to manage control and deploy our own wealth it's not somebody else we are doing it ourselves major equipment we're now going into phase number three which is what I call The Soaring Falcons we'll be in the Falcons but now we're going to go towards the road the The Soaring Falcons and I'll discuss how that's going to happen but it's based a lot on going into the new economy on digitalization but also much more regionalized what I call regionalized globalization and at the same time you're moving towards decarbonization net zero emissions transforming the economy going into energy transmission so let's look at what what are the factors driving that but just to measure it we've developed an index called the global economic diversification index which you'll find on on our website which measures what happened between 19 2020 2010 to 2020 to over 20-year period and you'll see that the three economies which are the most Diversified is the UAE Saudi and of course Bahrain but much smaller the economy the others are lagging a bit behind this measures economic diversifications across three dimensions how Diversified is your output not just oil how Diversified is your trade and how Diversified is government revenue all three of those factors are extremely important in saying measuring how Diversified you are and as you can see there's been a big forward in terms of economic diversification over the past 20 years the past we now need to think of where are we heading so when we think about what I call economic diversification 2.0 there are five factors which are extremely important at the bottom is monetary and fiscal policy you now have changed from being pro-cyclical fiscal policies and monarchy policies to being counter-cyclical you now have the ability to change spending to impose taxes to change taxes and central banks now have the tools to conduct active monetary policy which we didn't have in the past remember we are all pegged to the US dollar right and that constrains you in terms of Economic Policy but we've been managing to change that second thing extremely important as was just explained in the IPO fund is the new economy Investments and policies this is part of industrialization policy not just pure macro but also industrialized industrialization policy accompanied by structural reforms and liberalization and the two important elements for the future now is a new energy map which is developing all of us are living what's happening in Europe and the energy crisis what we don't see yet is that this is a big opportunity for the GCC countries in this part of the world in fact the GCC are going to become more important in the global energy map than they were before because of things like hydrogen and liquid natural gas and all the rest but at the same time we know that the world is heading towards an energy transition and we need to accompany that indeed support it and what I'm going to be making a case for is that UAE and Saudi will be the center of renewable energy Finance in the years to come because they're making massive investments in the renewable energy such as solar so what are the elements that can drive this economic diversification 2.

0 the first one is regional politics as you know a decision was taken consciously of disengaging from Regional conflicts this was at the high level across the region you don't want to get involved in conflicts that don't mean anything to you conscious decision second going for greater Regional integration giving foreign aid and finance to help countries for example Egypt and others joint industrial Partnerships but also forging new links through diplomatic openings such as the Abraham Accords but more important in terms of a building block for the future is what I call regionalized globalization the UAE is now at the Forefront in signing free trade agreements with a number of countries India Indonesia and perhaps soon China I don't know but we need to remember that Asia today is our biggest Market not just for oil and gas our most economic trade partner so what's happening now is that we're now signing free trade and investment agreements with those enormous blocks that's going to help us transform our economies and increasingly and this is where the infrastructure is so important we can integrate many countries that don't have the infrastructure that we have think of India India has very poor infrastructure but we provide them with airline services so they use our ports our airports and others so this means that we integrate them into Global Supply chains so they come through us to get integrated into the globe and finally if I look forward we're going to have an integrated GCC power grid that means that we can produce electricity locally using renewable energy such as solar and then exporting it including into countries like Europe or eventually to India Pakistan and other countries close to us as well as the rest of the Middle East so those are all on the horizon so what is our role well here I'm focusing a lot more in terms of the finance industry we said already that I now managed to control my own wealth important I had the capacity to do so I have the people I have the rules and regulations um and remember we had the ability we didn't have any Legacy systems so we could adapt and develop rules and regulations and infrastructure to suit us forward so when I look at that I look at four elements which I think are extremely important there's a new Global energy map which is emerging hydrogen and the rest we should finance that out of here we need to finance structural change privatization of state-owned assets or state-owned Enterprises it started with aramco in Saudi Arabia it's now happening in Abu Dhabi it's now happening in Dubai that means you will de-risk your fossil fuel assets over time and you get more involvement of the private sector here as well so that's the second dimension you need to look at third as the UAE and Saudi and GCC Stein free trade agreements for the rest of the world we have to think about how do we Finance trade and investment in all those countries and Link them more deeply into our economy utilization and new economy is a major area this was mentioned as part of the Abu Dhabi IPO fund that's certainly the direction to go why because we want to create jobs for our young people that's the most important thing we want diversification but we want to grow our entrepreneurs in Innovation and create jobs for our young people and finally of course your role is how do I manage to deploy my wealth and do it securely and soundly so those are I think the the five elements moving forward so I'm told that I've run out of time 12 minutes so this is in fact my last slide okay usually as an economist I'm a practitioner what they call the Dismal science right I always tell you about the risks and the crises Etc and we have plenty of those I will tell you this is one of my first times where I've had the positive message which I believe in throughout and this is the summary of it number one um UAE and Saudi now have maturing economies they built up their infrastructure they are implementing economic diversification 2.0 which will mean less volatile more stable but also higher growth path than what we had before number two you're integrating increasingly economies which are linked to GCC trade and investment that'll mean more trade opportunities more opportunities for Innovation more opportunities for job creation and economic diversification message number three when the rest of the world is fragmenting and decoupling because they don't like China or they don't like some other country this is a big opportunity for us because it means we don't need to be associated with that we don't want conflicts we create our own Regional markets we create regionalized globalization using our assets using our infrastructure and those are the five elements I think which should drive our strategy moving forward financing Regional globalization digitalization and modern Investments and modern Technologies three we have the opportunity to become a global clean energy and renewable energy Hub at the moment there is no renewable energy Hub in the world not in New York not in London not anywhere else we can be the Global Hub for renewable energy and clean technology and finally of course there's a new energy Global energy map occurring we can make that happen and of course you know this better than I you develop the capital markets go for privatization Finance stuff so that's it 30 years um it's an amazing transformation the only other country I know of that was able to transform in such a short period of time as China with very different circumstances but there you are I mean here's a you're living in the UAE you went from a desert and you sent a probe to Mars you sent the probe to Mars and there's a Mars program now happening maybe next time we meet there will be a Space Center here where we can send Rockets up there why because increasingly the future is going to be in space which controls satellites if I don't control my satellites in space I do not control what's happening on the ground so maybe that's the next thing on the horizon soaring golf Falcons thank you