ABU DHABI MEGA PROJECTS: POWERS BEHIND THE DREAM

UNCLAS SECTION 01 OF 04 ABU DHABI 000975

SENSITIVE
SIPDIS

STATE FOR NEA/ARP BMASILKO, NEA/PI, NEA/PPD
ALSO FOR OES, EEB

E.O. 12958: N/A
TAGS: ECON EINV ETRD EIND SENV PGOV AE US
SUBJECT: ABU DHABI MEGA PROJECTS: POWERS BEHIND THE DREAM

REF: A) ABU DHABI 945 (Mega-projects: Masdar)
B) ABU DHABI 943 (Mega-projects: Listing)
C) ABU DHABI 920 (Mega-projects: Overview)
D) DUBAI 329 (Labor accommodations)
E) DUBAI 271 (Dubai mega-projects)
F) DUBAI 272 (Dubai mega-projects)

ABU DHABI 00000975 001.2 OF 004


SUMMARY
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1. (SBU) Abu Dhabi, the capital of the UAE and one of the richest
cities in the world, is taking bold steps to change its landscape
(reftels A, B, C). With approximately 1,460,000 residents in the
Emirate of Abu Dhabi (the majority in the city of Abu Dhabi itself),
one-tenth of the planet's oil, and estimates of nearly $1 trillion
invested abroad, few can fathom its vast wealth. And what does a
small country do with such phenomenal resources? Abu Dhabi is
moving fast and furiously to make its mark as a rival of Singapore,
Tokyo -- and perhaps, Dubai. Residents of Abu Dhabi navigate around
construction sites with foreign workers building skyscrapers,
five-star hotels, shopping malls, million dollar residential areas,
and more! But who and what are behind all the seemingly limitless
developments and grand investments? Much of it starts with the Abu
Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan and follows
with billions of dollars of investments, an emerging cast of mega
developers, and, of course, U.S. (and other non-UAE) commercial
interests. This cable will note key players in Abu Dhabi's quick
race to the top in the midst of cranes, trucks, concrete, dust, and
sand -- all working towards making the Abu Dhabi brand known
world-wide. End summary.

ROYAL LEADERSHIP
--------------


2. (SBU) The November, 2004 death of UAE founder Sheikh Zayed bin
Sultan Al Nahyan left the field of Abu Dhabi leadership to his 19
sons; Sheikh Khalifa, the eldest, former Crown Prince and undisputed
senior player, easily became Ruler of Abu Dhabi and President of the
UAE Federation. Next in line, Sheikh Mohammed bin Zayed (MbZ)
became the new Crown Prince, taking over the day-to-day running of
Abu Dhabi. The new team quickly set in motion a spirited plan to
make Abu Dhabi a well-known financial and touristic epicenter of the
region. Sheikh Mohammed has since made his mark on almost every
major development underway in Abu Dhabi.


3. (SBU) Sheikh Mohammed, juggling the roles of Crown Prince and
Deputy Supreme Commander of the UAE Armed Forces, also heads the Abu
Dhabi Executive Affairs Authority and the Emirate's major
development organization "Mubadala." Since its establishment in
2002, Mubadala represents the main investment vehicle for the
Emirate to achieve a broad range of sustainable social and economic
benefits. Further, MbZ heads the Abu Dhabi Council for Economic
Development (ADCED) -- the Emirate's premier economic planning
institution. A hands-on manager, MbZ is a graduate of Britain's
Sandhurst military academy and upon becoming Crown Prince rapidly
asserted his role in upgrading Abu Dhabi infrastructure. As part of
MbZ's ambitions to put Abu Dhabi on the world map, he champions a
vision of Abu Dhabi as a hub for culture, tourism, research, and
prosperity.


4. (SBU) MbZ's team has consistently touted the benefits of 1)
transportation, 2) iconic landmarks, 3) attractive tourist and
resort destinations, and 4) sustainable investment. One of the
first projects to get off the ground was Abu Dhabi's own
international air carrier, Etihad Airways. The idea was to
duplicate the success of Emirates, the airline that helped put Dubai
on the map as a tourist destination. Initially, Etihad placed an $8
billion order with Airbus, including four A380s, and recently it
ordered $9.4 billion from Boeing (35 Dream Liners and ten 777s).
Abu Dhabi's iconic character took another step into luxury with the
2005 construction of the $3 billion Emirates Palace hotel, featuring
$1,000-a-night rooms and $10,000-a-night suites. The lavish
"seven-star" palace sets a tone for other developments, many
designed to complement the work of the Abu Dhabi Tourism Authority,
established in 2004 to promote and develop the Emirate's
international image as a tourist destination. Finally, with
Mubadala as a key tool, MbZ seeks to invest wisely ($200 billion
over the next ten years) to ensure Abu Dhabi's position both
domestically and internationally. With billions of dollars on hand
and limitless ambition, MbZ and his team have overseen a boom of
construction, real estate development, and mega project expansion in
Abu Dhabi since 2004.

MUBADALA
--------------


5. (SBU) Investing, and investing big, in the development of the
Emirate, Mubadala is a Public Joint Stock Company headquartered in

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Abu Dhabi focusing on developing and managing extensive and diverse
portfolios of commercial initiatives. Mubadala's sole shareholder
is the Government of the Emirate of Abu Dhabi. It is currently
managing a multi-billion dollar portfolio of local, regional, and
international investments, projects, and initiatives. It employs
over 500 employees. Through its investment and development
projects, Mubadala is both a catalyst for, and a reflection of, the
drive for economic diversification of Abu Dhabi. Its impact is
evident domestically and internationally in sectors such as energy,
aerospace, real estate, healthcare, technology, infrastructure, and
services. A plan to open a branch campus of New York University is
yet another example of the diversity and drive of the organization.


6. (SBU) Decision-makers at Mubadala have undertaken bold and
deliberate steps to drive growth in new areas of the local economy,
and facilitate greater engagement with the business world and the
private sector. Its CEO is Khaldoon Khalifa al Mubarak, a
thirty-something, Tufts educated entrepreneur at the forefront of
the economic development in Abu Dhabi. He has helped expand
Mubadala into shopping malls, residential properties, healthcare,
petroleum, telecommunications, and many other global business
opportunities. (Mubarak also leads the Executive Affairs Authority
under MbZ's leadership. A close confidant of the Crown Prince and a
frequent interlocutor with senior USG visitors, he embodies the
confidence and ambition of the Abu Dhabi vision articulated by
MbZ.)


7. (SBU) The Mubadala website quotes Sheikh Mohammed as saying:
"Our Emirate is in the midst of a significant time in its history,
and continues to enjoy a proud record of successful international
partnerships across a range of sectors. As our economy continues to
diversify, organizations such as Mubadala Development are ideally
placed to expand on those achievements." Mubadala is obviously
expanding and doing so in a big way -- with hands in almost every
major project in Abu Dhabi, including large stakes in the major mega
developers who are quickly turning profits as big ideas start to
become a reality.


8. (SBU) To name a few of its investments, Mubadala acquired a 5%
share of Ferrari in July 2007, and is a shareholder in Abu Dhabi
Ship Building, Aldar Properties, Injazat Data Systems (with U.S.
company Electronic Data Systems) and the National Central Cooling
Company. Additionally, along with Volkswagen and the Al Olayan
Group of Saudi Arabia, Mubadala has also become a partner in
LeasePlan, Europe's leading fleet management company. It is also
making bold foreign investments, including its recent joint venture
with General Electric Company worth $8 billion focused on providing
commercial finance in the Middle East and Africa.

MEGA DEVELOPERS
--------------


9. (SBU) With the boom in construction and infrastructure
development in Abu Dhabi that has been partially fueled by Mubadala,
there have also emerged a number of new, and rapidly profitable,
developers. The most notable are Aldar and Sorouh, both publicly
traded companies with significant ownership held by the Abu Dhabi
government (including Mubadala) and/or members of the Abu Dhabi
Royal Family. Aldar and Sorouh are flourishing largely because of
the 2005 Law Number 19 which formally abandoned an old property
regime and permitted the sale of land by citizens and, in some
areas, the purchase of 99-year leaseholds by foreigners. This law
paved the way for large-scale developers to move in and expand
business opportunities to include foreign investment, including the
purchase of residential real estate in Abu Dhabi. There are, of
course, a number of other developers present in Abu Dhabi but Aldar
and Sorouh are currently cornering the market on the major
developments -- subcontracting out work to a galaxy of smaller
concerns. Below is an overview of the two companies.

ALDAR
--------------

--- Developer: Aldar
--- Major Developments: Al Raha Beach and Gardens, Yas Island,
Central Market, and Cleveland Clinic.
--- Estimated Investments: Over 33 million square meters of land
area valued at over AED 39 billion ($11 billion USD) under
development in some of Abu Dhabi's most high profile projects.


10. (U) Aldar (purportedly modeled after Emaar Properties, the
development company that built much of Dubai),is charged with
developing a number of Abu Dhabi's strategic sites, including YAS
Island and neighboring Raha Beach. Aldar was formed in 2004 and is
actively developing a range of commercial, residential, and retail
projects in addition to luxury resorts. It also has plans to expand
internationally (to date, Aldar is only working in the UAE and
Kazakhstan). The company is owned by leading Abu Dhabi

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institutions, including Mubadala, and has over 20,000 investors
throughout the UAE and over 500 employees.

SOROUH
--------------

--- Developer: Sorouh
--- Major Developments: Lulu Island, Al Reem Island, and Khalidiya
Village
--- Estimated Investments: Projects are valued in excess of AED 45
billion ($12 billion USD).


11. (U) Another relatively new and highly successful developer is
Sorouh. Launched in September 2005, it employs in excess of 180
individuals. Sorouh is one of the most widely held stocks with
approximately 55,000 shareholders in the UAE. Sorouh is also the
largest Abu Dhabi-based, publicly listed real estate developer.
Sorouh has launched projects valued in excess of AED 45 billion ($12
billion USD).

TDIC
--------------

--- Government Developer: Tourism Development and Investment
Company (TDIC) (sole equity stakeholder is Abu Dhabi Tourism
Authority)
--- Major Developments: Saadiyat Island, Guggenheim Abu Dhabi, and
Louvre Abu Dhabi.


12. (SBU) Another companion to these highly successful developers
is the Tourism Development and Investment Company (TDIC),
established in April 2006 with the Abu Dhabi Tourism Authority as
its sole equity stakeholder. Some of TDIC's projects include the
transformation of Saadiyat Island (27 square kilometer "cultural"
island near the UAE capital outlined in ref B) and Desert Islands (a
multi-experiential destination in the emirate's Western Region).
The range of TDIC's project portfolio spans redevelopment of urban
landmark districts, new-build mixed-use complexes, down-town
business and leisure resorts, desert resorts and a leading-edge
headquarters which is to be a showcase in sustainability. (Every
new UAE institution needs an "iconic" home!) Sheikh Sultan Bin
Tahnoon Al Nahyan is the Chairman of TDIC and also chairs Abu Dhabi
Tourism Authority.

U.S. COMMERCIAL INTERESTS: BENEFICIARY OF THE BOOM
-------------- --------------


13. (SBU) With over 750 U.S. companies operating in the UAE, a
significant number of U.S. firms are integrally involved in various
aspects of the mega development in Abu Dhabi. There is obvious
interest in the success of the mega projects among U.S. investors
hoping to profit from the billions of dollars being poured into Abu
Dhabi's renaissance. U.S. companies are involved in almost every
aspect of development; where they are not building, they are
consulting. Awards like U.S.-based Thorium Power's two consulting
and strategic advisory service agreements worth $8.1 million to
evaluate nuclear energy are not uncommon. Etihad has purchased
millions of dollars of U.S. aircraft equipment. Additionally,
U.S.-based construction companies are involved directly or
indirectly in almost every aspect of project development. As the
mega projects continue to pursue an ambitious agenda, the
opportunities for U.S. business interests seem limitless. Hotels
around Abu Dhabi are filled to overcapacity with business travelers
trying to insert themselves into the mix: defense contractors,
environmental consultants, and real estate speculators -- all coming
to Abu Dhabi banking on the profitability of massive infrastructure
upgrades.


14. (U) According to the US-UAE Business Council's January 2008
"Trade and Investment Report", U.S. goods exports to the UAE
increased by 352 percent from $2.6 billion in 2001 to $11.9 billion
in 2006. This growth is far greater than the 42 percent increase
for overall U.S. exports around the world. The UAE's share in U.S.
exports to the Gulf Cooperation Council (GCC),which consists of the
UAE, Saudi Arabia, Qatar, Bahrain, Kuwait, and Oman, doubled from 25
percent in 2001 to 49 percent in 2006. The UAE is the single
largest export market for U.S. goods and services in the Middle
East, and U.S. exports to the UAE have expanded nearly five-fold
from 2000 to 2006. In 2006, the UAE imported $2,571 of U.S. goods
per capita, which exceeded that of many important U.S. trading
partners including Kuwait ($821),Saudi Arabia ($330),Japan ($468),
Germany ($501),Mexico ($1,287),and Israel ($1,558).


15. (U) Additionally, according to the report, U.S. exports to the
UAE originate from a wide variety of U.S. states. In 2006, the five
largest sources were: Washington (33 percent),Texas (21 percent),
California (8 percent),New York (6 percent),and Tennessee (3
percent). U.S. foreign direct investment in the UAE rose 445

ABU DHABI 00000975 004.2 OF 004


percent from at least $834 million in 2001 to $4,547 million in

2006. This figure far exceeds a worldwide increase of 63 percent in
the same period and an increase of only 22 percent in Saudi Arabia.
The pace of UAE investments in the United States has also quickened.
Recent examples include a proposed 20 percent share in NASDAQ, a
7.5 percent share in the Carlyle Group, an 8.1 percent share in
Advanced Micro Devices, and a 4.9 percent stake in Citigroup.
Cooperation extends beyond the private sector. U.S. non-profit
organizations are also expanding their activities in the UAE,
including a Johns Hopkins University partnership in a new cancer
treatment center and a New York University plan to establish a
branch campus in Abu Dhabi by 2010. If the boom continues as
planned, U.S. investments in the UAE will continue to expand
rapidly.

BUT WHERE DOES THE UAE GO FROM HERE?
--------------


16. (SBU) Comment: What does all this development and expansion
really mean for Abu Dhabi and the UAE? With less than 20% of the
resident population being Emirati citizens, who will occupy the
residences and patronize the projects? If the foreign population
grows, where does this increasing demographic imbalance leave the
culture and heritage of the country? The final cable in the series
will take a look at the socioeconomic impact of the mega projects on
the future of the nation. End comment.
QUINN