In September, the crown princes of Saudi and the UAE discussed bilateral relations and the prospects for developing strategic cooperation and other issues during a phone call, according to state media.
Allies they are, but economic competition between the Gulf neighbors is escalating in an effort to steer the region’s business, trade, and tourism hub in a post-oil era, each to its own camp.
The UAE recently announced a raft of new projects to boost its economic competitiveness and attract foreign investment, including making its visa regulation more flexible to attract residents and skilled workers.
The UAE also plans to launch 50 new economic initiatives to boost the country’s competitiveness and attract $150 billion in foreign direct investment in the next 9 years.
The projects, a few of which were already unveiled, include investing in technology and creating new visas to attract residents and skilled workers.
Among the projects, the UAE and the Emirates Development Bank will invest $1.36 bn in industrial technology and technology-heavy sectors, Minister of Industry and Advanced Technology Sultan al Jaber said during a recent media briefing.
“The UAE’s drive for the next 50 years is to become a global player across different industries,” Minister of State for Advanced Technology Sarah al-Amiri told Reuters.
Two new visa categories – one for freelancers and one for entrepreneurs and skilled workers – will be created to attract and retain foreigners with desirable skills.
The new “green visa” for skilled workers will have more flexibility than a renewable visa, llowing for the sponsorship of family members and for more time to find a new job after one’s employment ends.
Last year, the UAE extended to more categories a “golden” visa system which grants 10-year residencies.
The Carbon front
The Middle East is already in the midst of a climate crisis and remains one of the most water-stressed regions in the world. Yet, climate action has not been a priority for oil-producing countries. However, this October, the UAE committed to a “net-zero” target for carbon emissions by 2050.
Some observers speculate that the UAE’s target of “net-zero” emissions is unrealistic as over 30% of the nation’s GDP is directly based upon oil exports and revenues. Today, the nation produces 2.9 million barrels of oil each day and is the third-greatest producer of CO2 emissions in the world, according to the World Bank.
It is likely that Abu Dhabi, which is the largest producer of UAE oil, is engaging in a geopolitical power play with Saudi in a bid to attract foreign investment. With 44 countries worldwide committing to reduce their carbon emissions, the UAE and Saudi need to make their energy-rich economies more palatable to climate-positive nations. As a result, these countries are making the push toward renewable energy sources, such as solar energy.
Saudi’s efforts to rival the UAE as the region’s top business and financial hub won’t have a “dramatic negative impact” on Abu Dhabi, Mark Cutis, chief executive of Abu Dhabi Global Market (ADGM) recently told CNBC.
“Here, it’s easy to move your family, it’s easy to live here, and you have the rule of law, the pools of capital, and the visa situation – it’s a package,” Cutis said.
His comments come amid a growing economic rivalry between Saudi and the UAE, as both countries recover from the pandemic seeking to boost non-oil sector growth.
Saudi had said its government would stop doing business with international companies that didn’t have regional headquarters in the kingdom by 2024. The UAE hit back by launching a plan to attract $150 bn in foreign investment over the next nine years.
The UAE is also forecast to bring in $33 billion of investment from Dubai’s Expo 2020, as well as a 1.5% boost in GDP, according to pre-pandemic estimates by EY. The same advisory firm estimated the cost for organizing the Expo at $6.8 bn.
The UAE economy is expected to grow 2.1% this year and 4.2% in 2022, according to the UAE Central Bank.
Abu Dhabi Global Markets, an international financial center based on Al Maryah Island in the capital Abu Dhabi, is home to 3,448 registered companies as of Q1, 2021 and manages over $75 bn in assets, according to ADGM’s website.
Saudi, a leading urban city
Saudi’s decision to cease doing business with international companies whose regional headquarters are not based within the kingdom, in line with the country’s transformative vision for the future, will accelerate economic reform across the GCC, according to a leading Saudi law firm, HMCO.
The new policy, which comes into effect on Jan 1. 2024, will encourage foreign firms to open a permanent, in-country regional presence, help create employment opportunities for Saudi nationals, and foster investment opportunities in key sectors of the non-oil economy, HMCO said at the Construction Week Leaders KSA Summit, held on 28th September 2021.
The infrastructure and construction industry is a crucial pillar of the government’s plan to overhaul Saudi’s economy and earlier this year, the Kingdom revamped its FDI regulations and procurement laws to increase transparency and improve the ease of doing business in the country with a population estimated to be around 15 to 20 million by 2030.
Suhaib Hammad, Head of Commercial & IP practice, Hammad & Al-Mehdar, said: “The scale of infrastructure, entertainment projects and regulatory improvements being implemented in the Kingdom is phenomenal. The progressive changes, coupled with aggressive targets laid out by the government, is integral to Saudi’s ambition to increase FDI from 3.8% to 5.7% of GDP by 2030, which will, in turn, stimulate broader economic growth.”