Dubai and Abu Dhabi will consolidate, not compete

Subject

Economic consolidation in the UAE.

Significance

Abu Dhabi is implementing a new round of mergers across sovereign investment vehicles. This is part of a process that began some years ago, initially in Dubai. The trend has economic and political drivers, and includes fiscal restraints and the shift to a more aggressive foreign policy strategy.

Impacts

• Abu Dhabi’s new, larger investment fund could increase support for the smaller emirates and regional neighbours.
• Privatisation is likely to increase at a slow and steady pace in the UAE.
• Authorities may encourage corporate and quasi-sovereign issuance aimed to revive local capital markets.
• Capital markets’ competition in the search for yield with their regional peers will intensify.