Abu Dhabi: The UAE government plans to increase the contribution of the non-oil sector to 80 per cent of the nation’s gross domestic product (GDP) from the present figure of 70 per cent in the next 10 to 15 years, Minister of Economy Sultan Bin Saeed Al Mansouri said.
Speaking at the Beirut Institute Summit in Abu Dhabi, Mansouri said the government has a policy of economic diversification to reduce dependence on oil to the overall GDP of the country.
“We want to increase the contribution of non-oil sector to 80 per cent from the present figures of 70 per cent in the next 10-15 years to the GDP. Our target is to reduce the contribution of oil sector to just 20 per cent to the overall GDP,” said Al Mansouri.
He said the growth rate recorded by the UAE economy last year was 4.6 per cent and the total GDP was $1.47 trillion.
“The country attracted foreign direct investment to the tune of $100 billion in the last ten years. We have become a favoured destination and ranked number one in the Middle East and Arab region in attracting FDI by World Economic Forum. It has a positive effect on the economy.”
“We have put an ambitious vision, purpose and agenda for each government body and the cabinet declared year 2014 as year of innovation. We plan to have 5 per cent of the total GDP from innovation by 2021.”
Lower oil prices and slow world economic growth, he said are the two most important challenges confronting the Arab region. “We have to be active, proactive in the political and economic situation. There must be solid infrastructure and logistical environment to achieve growth.”
“Our economy succeeded in maintaining high growth rate based on clear progressive vision and a clear goal.”
Gulf countries are feeling the heat after oil prices plummeted from $115 per barrel in last June to less than $50 per barrel in recent times.
The UAE and other Gulf countries are trying to diversify the economy and undertake reforms in subsidies in order to overcome revenue losses caused by lower oil prices.
Let’s explain what through Emirates’ current economy
The United Arab Emirates (UAE) is among the world’s 10 largest oil producers and is a member of the Organization of the Petroleum Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GECF).
Since its independence in 1971, UAE relied on its large oil and natural gas resources to support its economy. The UAE is currently the sixth-largest petroleum producer in the world. In 2013, hydrocarbon export revenues were $123 billion, up from approximately $75 billion in 2010, according to the International Monetary Fund (IMF)
In addition to the growing hydrocarbon economy, the UAE is becoming one of the world’s most important financial centers and a major trading center in the Middle East. Investments in nonenergy sectors, such as infrastructure and technology, along with a rapidly recovering real estate sector, continue to provide the UAE with insurance against oil price declines and global economic stagnation. IMF data indicate the UAE’s real gross domestic product grew by 5.2% in 2013. However, a sustained decline in oil prices could lead to a reduction in spending in the near future.
Natural gas use in the UAE is rising. Although the country is a member of the Gas Exporting Countries Forum (GECF), domestic demand is likely to draw heavily on the UAE’s natural gas resources. Currently, the country both imports and exports liquefied natural gas (LNG) and shares international natural gas pipelines with Qatar and Oman. The UAE is also one of the world’s leaders in the use of natural gas in enhanced oil recovery (EOR) techniques. With natural gas demand rising, the government plans to expand domestic production using EOR techniques to meet the demand for domestic consumption and exports.
The UAE is making notable progress in diversifying its economy through tourism, trade, and manufacturing. However, in the near term, oil, natural gas, and associated industries will continue to account for most of the economic activity in the seven emirates.
UAE’s Energy Forecast
Dubai is investing millions of US dollars to diversify its energy supply, offset a shortage in natural gas and keep pace with rising power demand. By 2030 the emirate plans to generate 5% of its electricity from renewable sources, and 24% from coal and nuclear energy imported from neighbouring Abu Dhabi. The UAE capital plans to bring four nuclear plants online by 2020, delivering 5,400 mw of power to the national grid, and is also investing in solar energy. Abu Dhabi aims to generate at least 7% of the power it uses from renewable sources by 2020.
The UAE, OPEC’s fourth-largest crude oil producer, is seeking to lessen its reliance on oil and preserve its reserves for export rather than power generation. The Gulf state is one of the highest per-capita electricity consumers in the world, and faces significant gas shortages during the peak-demand summer months. A boom in the development of energy-intensive heavy industries, such as petrochemical refining and aluminium smelting, has further widened the deficit.
Sources: Gulfnews.com, EIA, EIU