Analysis of Abu Dhabi’s emerging private sector shows a healthy proportion of large and small businesses, and a proportionate employment distribution. The proportion of large to small companies in Abu Dhabi differs little from that seen in international benchmark economies, in particular Ireland and Norway.
Similarly, employment distribution among the various-sized enterprises is comparable to
benchmarks, although large companies have gained an increasing share of human capital since 1995.
There is some imbalance, however, between the economic output of large and small enterprises, largely as a result of the dominance of the oil sector. Contribution to GDP is highly concentrated in large enterprises, suggesting that there is room major crude oil producer, the Emirate is committed
to supporting the international economy by playing its role in ensuring stable oil prices and supplies. As a result, the oil sector will continue to grow rapidly, and Abu Dhabi will continue to use its oil wealth to drive and underpin domestic economic growth.
Assuming that the hydrocarbon sector continues to grow at historic rates, Abu Dhabi aims to achieve a 64% contribution to GDP by the non-oil sectors, including petrochemicals, by 2030, which will reverse the current pattern of sectoral contribution to GDP.
Abu Dhabi therefore has a clear opportunity to increase GDP growth sustainability and bring greater stability to the economy by pushing for faster growth in export-oriented non-oil sectors. Abu Dhabi wants to attain similar levels of diversification and economic sustainability as other transformation economies such as Norway, Ireland, New Zealand and Singapore, which have successfully made radical transitions in their economic structure and growth cycle over recent decades.
The Emirate’s emerging private sector is growing quickly, and the proportion of large to small business in Abu Dhabi is in line with developed international economies.
(*) Figures for benchmarked countries range from 2003 to 2005
Source: OECD SME and Entrepreneurship Outlook 2005 (OECD); SMEs in Europe 2003 (European Commission); UAE Ministry of Economy;
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and capital, Abu Dhabi fits this profile. Historically, countries focused on “National Champions” have been vulnerable to financial and economic aggregate shocks such as the collapse of an industry, recession in key export markets, or money and capital market crises.
Diversifying the enterprise base to include a larger number of economically active SMEs spreads and fragments this risk and reduces the adverse effects of shocks on the economy as a whole. At the same time, competition among a larger number of SMEs, or cooperation within an SME cluster, enables the kind of economic and technological innovation that will maximise growth in high value-added economic sectors and could potentially spawn the next generation of “National Champions”. Finally, the SME sector has been shown elsewhere to create more and better quality jobs, which will become a more pressing concern as the Emirati population of Abu Dhabi increases. The development of SMEs will also open new opportunities by offering entrepreneurs, business owners and venture capitalists a thriving environment to grow.
for improvement in the productivity of small and medium-sized enterprises (SMEs). In the majority of G7 economies, SMEs account for a greater proportion of GDP than large enterprises. Developing the SME sector will bring Abu Dhabi in line with its benchmarks, and at the same time reduce the economy’s exposure to risks, encourage innovation and create jobs.
Abu Dhabi’s immediate priorities of sustainable economic growth and non-oil focused sector diversification can be quickly achieved through the development of “National Champions”: large enterprises that underpin the economy and around which industrial and service clusters could develop. The building of “National Champions” has been favoured by countries with a particular competitive advantage, such as leadership in a certain technical field, or an abundance of certain resources, such as a large workforce or availability of a natural resource. With its abundant energy
There is room for improvement in the productivity of SMEs.
(*) Figures for benchmarked countries range from 2003 to 2005
(**) Abu Dhabi data is only for employees of listed enterprises within Abu Dhabi Department of Planning and Economy’s statistics. In fact, the total number of all employees is 786,738 in 2005
Source: OECD SME and Entrepreneurship Outlook 2005 (OECD); SMEs in Europe 2003 (European Commission); UAE Ministry of Economy;
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In order to broaden its enterprise base, Abu Dhabi needs to develop a hybrid strategy balancing the development of large “National Champions” and the encouragement of SMEs.
This will be achieved by increasing the overall economic importance of the non-oil sector, in which SMEs play a more proportionate role, and by further stimulating SMEs in both the non-oil and oil (*) Figures for benchmarked countries are averages for 1990-1999
Source: OECD SME and Entrepreneurship Outlook 2005 (OECD); SMEs in Europe 2003 (European Commission); Abu Dhabi Statistical Yearbook 2005;
Abu Dhabi Economic Vision 2030 Team Analysis
(*) Benchmark country figures are averages for 1990-1999, and Abu Dhabi’s are adjusted to reconcile ADCCI and DPE data with official DPE figures based on the Abu Dhabi Census 2005
Source: SMEs across the Globe: A New Database (Word Bank); OECD SME and Entrepreneurship Outlook 2005; UAE Ministry of Economy;
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access to capital and when favourable business conditions are created through institutional and legislative reform. Some countries have used SMEs to develop leadership, human capital, and technical know-how in fast-growing sectors.