Waking up a sleeping giant of the Middle East

The air is thick with noise as languages of all kinds are spoken by people of every colour and creed passing through the retail heart of one of the world's busiest airports.

The activity is the result of Dubai's rapid economic growth, which has sparked a tourism boom and an explosion in business travel.

The emirate, one of seven that form the United Arab Emirates (UAE), is the front runner in a prosperity race that threatens to engulf practically all who come before it.

While Dubai is the UAE's regional commercial centre, it is near neighbour and federal capital Abu Dhabi that is starting to attract the spotlight.

Accounting for 90 per cent of total UAE crude oil production, Abu Dhabi has a financial clout that is incomprehensible and, in the Middle East crucible of commerce, it is a sleeping giant that is just beginning to waken up.

With an estimated 120 years of oil reserves underground, Abu Dhabi's eyes have been opened by Dubai's success to the benefits of not being over-reliant on a single sector, and diversification has become the buzzword.

So while it plans to increase oil production capacity from 2.63 million barrels a day to 3.5 million by 2010, its new focus is on other opportunities that will enable it to reach new heights.

A UK Government official in Abu Dhabi explained: "Although oil and gas will remain a cornerstone of Abu Dhabi's economy for many years, it is recognised that reserves are finite and that to sustain development, it is time to diversify the economy."

An obvious starting point is tourism - the Abu Dhabi Tourist Authority (ADTA) has been established to attract three million tourists by 2015, and there are plans for 100 hotels to be in place by this time. The ADTA has also signed deals to house both a Louvre and Guggenheim museum.

It has begun construction on a £7bn airport terminal with a capacity of 20 million passengers by 2010. Additional airport extensions will see it capable of handling 50 million passengers in time for the completion of a raft of other projects.

Abu Dhabi is developing a Formula 1 circuit and one of its flagship developments will be a beachside complex, Al Raha Beach, capable of housing 120,000 people.

James Ramsbotham, NECC chief executive, said: "The scale of their ambition is staggering. They have a clear focus on their growth areas and have the financial wherewithal to effortlessly complete any project to which they set their minds. They are unfettered by the bureaucracy that afflicts the UK and, consequently, the changes they have planned will be swiftly implemented.

"While we labour for decades to get a second Tyne Tunnel and have a monumental fight to improve key infrastructure, such as the A1 Western bypass or dualling the A66, we can only look with envy on the facilities they have at their disposal.

"The challenge, though, is how we can make best use of the new willingness that exists to do business with the West."

The UAE is already the largest market in the Middle East for the UK and the ninth largest worldwide. UK exports to the UAE as a whole increased by 106 per cent in 2005, to £5.57bn, and two-way trade increased significantly to £6.99bn last year, from £3.8bn in 2004.

But until now, the ruling authorities have been unwilling to ease the stranglehold of control they had on trade.

The Government official said: "It is still a fact that business must be done in conjunction with a local agent or partner. However, there are signs that this arrangement may be changed to favour the foreign investor."

Abu Dhabi is moving quickly to a more privatised economy. It announced the privatisation of the General Industries Council through the formation of the General Holding Company, which has a primary role to set up three industrial Special Economic Zones offering tax and rental incentives to foreign firms.

Brendan Murphy, NECC international trade director, said: "There have been considerable changes in the United Arab Emirates with a new economic approach and a push for privatisation. Oil and gas will remain the dominant economic forces, but Abu Dhabi wants to become much more diverse.

"The range of opportunities for North-East companies is practically limitless. This is an area that wants to do business with the world and we need to do all we can to embrace that fact."

Aside from tourism, this diversification will focus on construction and property development, banking and legal sectors, as well as renewable energy.

In total, Abu Dhabi expects to spend more than £75.8bn on real estate development projects in the next few years.

In addition to the Al Raha Beach complex, there are three further city suburbs being planned, each capable of housing more than 100,000 people.

The emirate is relaxing laws on home ownership, which is expected to drive a property boom and add further to the expatriate community, which already accounts for 80 per cent of total residency.

UK plc is heavily involved in these developments, with household names from the construction industry such as Halcrow, Hyder, Mott MacDonald, Atkins and EC Harris all involved.

The growing banking and legal sectors are also heavily spotted, with blue-chip UK companies, including HSBC, Standard Chartered and Barclays on the finance side and Trowers and Hamlins, Richards and Butlers, Simmons and Simmons and Hugh Fraser on the legal side.

Opportunities are also opening up in health and education.

The Abu Dhabi General Health Authority has looked closely at the UK before considering developments to its health sector, and is debating the benefits of privatising and outsourcing services on both the clinical and facilities management sides.

In a similar scenario to the North-East of England, Abu Dhabi found that one of the most pressing issues facing its future economic growth was a paucity of skills.

To address this issue in the short-term, it has had to look abroad for the expertise to drive many of its development plans. However, it is taking rapid steps to address this issue and is involving the private sector in this approach.

Thirty primary schools have gone to private public partnership (PPP) and a further 50 more are expected to in September.

Colleges and universities are also being constructed to raise student numbers and educational standards.

Mr Ramsbotham said: "Both our region and theirs are economies founded on natural resources and both have had to embrace the need for change away from a reliance on traditional industries.

"We are both enjoying tremendous growth, however, the scale of change in Abu Dhabi is unbelievable unless you witness it with your own eyes.

"The interesting thing is that North-East companies will have a tremendous amount to offer. With the vast scale of development, you cannot fail to see opportunity everywhere you look. And, with a dedicated daily flight from Newcastle to Dubai launching this September, it is surprisingly easy to link direct with the UAE."

The NECC has now established a formal trading Memorandum of Understanding with the Abu Dhabi Chamber of Commerce (ADCC) which will provide an established point of contact for regional businesses.

ADCC has already announced plans to bring a trade delegation to the North-East in May, which will start what both sides hope will be a fruitful partnership.

The agreement comes on the back of substantial work by the County Durham Development Company (CDDC) to forge links with Abu Dhabi over a number of years.

Mr Ramsbotham said: "CDDC has laid considerable groundwork in UAE, which was invaluable in helping us to set up business-to-business links with Abu Dhabi. And while CDDC's primary aim is to attract inward investment into County Durham, there are substantial benefits to be had across the North-East in promoting trade between our region and Abu Dhabi.

"This will be a real focus for NECC's international trade arm over the coming months and years to make sure that the agreement we have just signed is a real driver of business.

"The mood music from Abu Dhabi is positive and the fact that they have already announced a trade mission to the North-East is a strong indication of their intent to make this work.