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IdentifierCreatedClassificationOrigin
03ABUDHABI2345 2003-05-14 09:44:00 CONFIDENTIAL Embassy Abu Dhabi
Cable title:  

ABU DHABI: A RENTIER STATE IN MORE WAYS THAN ONE

Tags:   ECON EFIN EINV ETRD TC 
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Diana T Fritz  05/24/2007 04:15:33 PM  From  DB/Inbox:  Search Results

Cable 
Text:                                                                      
                                                                           
      
CONFIDENTIAL

SIPDIS
TELEGRAM                                             May 14, 2003


To:       No Action Addressee                                    

Action:   Unknown                                                

From:     AMEMBASSY ABU DHABI (ABU DHABI 2345 - ROUTINE)         

TAGS:     ECON, EFIN, EINV, ETRD                                 

Captions: None                                                   

Subject:  ABU DHABI: A RENTIER STATE IN MORE WAYS THAN ONE       

Ref:      None                                                   
_________________________________________________________________
C O N F I D E N T I A L        ABU DHABI 02345

SIPDIS
CXABU:
    ACTION: ECON 
    INFO:   P/M AMB DCM POL 
Laser1:
    INFO:   OBO GSO FCS 

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: DCM: RAALBRIGHT
DRAFTED: ECON: GARANA
CLEARED: ECON: TEWILLIAMS; OBO: JWHITNEY; GSO:MZADVA

VZCZCADI680
RR RUEHC RUEHZM RUEHTU
DE RUEHAD #2345 1340944
ZNY CCCCC ZZH
R 140944Z MAY 03
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 9948
INFO RUEHZM/GCC COLLECTIVE
RUEHTU/AMEMBASSY TUNIS 0515
					  C O N F I D E N T I A L ABU DHABI 002345 

SIPDIS

STATE FOR NEA/ARP, NEA/RA, EB, EB/CBA,
EB/ESP, M/OBO/REPM/RPM, M/OBO/OPS/AM/NEA FOR DAN ROMANO
AMEMBASSY TUNIS HOLD FOR FSI: OLIVER JOHN

E.O. 12958: DECL: 5/12/13
TAGS: ECON EFIN EINV ETRD TC
SUBJECT: ABU DHABI: A RENTIER STATE IN MORE WAYS THAN ONE



1. (U) Classified by Charge D'Affaires Richard A. Albright,
for reasons 1.5 (B) and (D).



2. (U) Local press reported that commercial and residential
rents in Abu Dhabi jumped between twenty and thirty percent
in the last year as the UAE capital maintained its status
as one of the world's most expensive real estate markets.
Western property consultants confirmed that the increase
encompassed the whole rental market and not just unit
prices, and was primarily driven by a sharp rise in
commercial real estate rates mandated by the government
body which oversees building construction and rental in the
capital. Last year real estate grossed approximately $5.53
billion -- a whopping nine percent of the UAE's total GDP,
making it the third largest GDP component after oil and
manufacturing. Return on investment in real estate ranged
between 6-8 percent, considerably higher than the five
percent on stocks or 1-2 percent on bank deposits.



3. (C) Rents in the capital are likely to increase further
in the next two years as the Abu Dhabi municipality has
temporarily decided to stop the common practice of
demolishing old buildings and replacing them with new,
larger structures. The average operational life of a
building in the UAE is generally less than thirty years due
to poor construction materials and techniques compounded by
the excessively hot and humid weather which adversely
impacts concrete and metal. Given the continued demand for
commercial and residential space, the moratorium on
building replacement suggests that the Khalifa Committee,
chaired by Abu Dhabi Crown Prince Shaykh Khalifa bin Zayed,
will likely raise the rental floor (i.e. the minimum amount
for which a given type/size of property may be rented) even
higher in the years to come. (Note: The Khalifa Committee
is the giant, Abu Dhabi government-funded real estate
cartel which controls residential and commercial
construction and rental in the greater capital area. The
primary mechanism for redistribution of oil wealth to the
general citizenry, the Khalifa Committee funds real estate
projects, supervises construction, arranges for the leasing
of buildings, and apportions rent to the ostensible owners
-- effectively mandating minimum rental prices for both
commercial and residential real estate. Unrentable
facilities are simply left vacant, at considerable cost to
the government. End note.)



4. (C) Comment: Due to the lack of real estate options on
the island of Abu Dhabi, landlords know tenants have few
options when confronted with government mandated rent
increases. The moratorium on destroying and replacing
older properties in Abu Dhabi -- a decision made by the
Khalifa Committee -- reflects a belt-tightening decision on
the part of government officials. End comment.

Wahba