Abu Dhabi’s Foreign Assistance Steals Spotlight

While Abu Dhabi has developed a reputation for its generous foreign aid, little attention is paid its significant internal aid, which keeps the other emirates afloat.

al-monitor An employee walks past a screen displaying the worldwide locations of the National Bank of Abu Dhabi, at the bank's headquarters in Abu Dhabi, April 3, 2013. Photo by REUTERS/Ben Job.

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uae, gulf states, gulf emirates, foreign aid

Sep 23, 2013

Although lost in the spotlight on Abu Dhabi’s foreign financial aid, historically the emirate has also been tremendously generous in its own backyard, where it counts the most.

For example, much has been said about the UAE’s assistance to post-Brotherhood Egypt over the past few weeks. The country, along with Saudi Arabia and Kuwait, had immediately provided Egypt with a generous package of $12 billion, with Abu Dhabi contributing $3 billion alone. Shortly thereafter, Abu Dhabi’s crown prince visited Egypt and pledged an additional $2 billion to the cash-strapped North African state. Abu Dhabi also sent seven shipments of fuel valued at $225 million in July in addition to a number of developmental projects. Closer in the Gulf, Abu Dhabi had granted Bahrain $2.5 billion early this year and pumped $500 million into Oman as part of the Gulf Aid Program.

According to a 2010 report by the UAE Foreign Aid Coordination Office, Abu Dhabi’s foreign assistance amounted to $44.3 billion by 2010, benefiting more than 90 countries. A senior source told me that during the era of the UAE’s founding father, Sheikh Zayed, the amount of aid was so great that not all available records truly reflect it.

In order to understand Abu Dhabi’s regional and international financial-assistance programs, one must consider another aspect of the story that is little discussed. Abu Dhabi’s internal assistance program is perhaps where the real story lies. Although Abu Dhabi’s foreign assistance is widely known, the internal dynamics of the UAE are not as clear to outside observers. Abu Dhabi, the UAE’s capital, sits on vast oil reserves that it has used prudently to the benefit of others. In fact, Abu Dhabi is the world’s only federal capital that almost entirely subsidizes the budget of the rest of the country, and without collecting any income taxes whatsoever.

In the 1970s, Abu Dhabi was essentially the sole contributor to the budget of the UAE, with Dubai stepping in in the early 1980s when petroleum revenues had fallen and the UAE suffered its first budget deficit. This contribution from Abu Dhabi to its federal partners over the past 42 years easily amounts to several tens of billions of dollars and exceeds the foreign-assistance numbers.

Back in 1970, the United Nations recommended that countries give 0.7% of their gross national product as part of the Millennium Development Goals. However, Abu Dhabi remains one of the few donors in the world that has exceeded this ratio, with some estimates suggesting that Abu Dhabi’s foreign aid amounts to a remarkable 3% of GDP. Unbeknownst to many, Abu Dhabi’s assistance to its federal partners far exceeds its impressive foreign-aid ratio.

Since the 1980s, Abu Dhabi has continuously contributed between 40% and 90% of the UAE’s budget, with the rest consisting mainly of individual ministry revenues and a smaller contribution from Dubai of around 10%. This provides a lifeline to the five northern emirates, which do not have any significant oil income. These include Sharjah, Ras Al Khaimah, Fujairah, Ajman and Um Al Qaiwain. Abu Dhabi also maintains its own budget, which means that the funds of the UAE budget are almost exclusively dedicated to the development of the other emirates of the federation. Thanks in large part to the Abu Dhabi contributions that allowed the other local governments to invest in essential infrastructure, the GDP of the UAE has grown from $1.7 billion in 1971 to over $270 billion in 2010.

Furthermore, the federal budget mentioned above only tells one side of the story of Abu Dhabi’s internal assistance initiatives. The office of the president of the UAE has been active with a parallel development program that only last July launched a $5.2 billion program to build housing and upgrade the infrastructure of the northern emirates, which was preceded by a tour of the area by Abu Dhabi’s crown prince. This is in addition to Abu Dhabi’s contribution to the 2013 budget that amounts to $4.8 billion. Therefore, a staggering amount of $10 billion was dedicated by Abu Dhabi this year alone to the rest of the country, on the basis of only two initiatives.

A further avenue in which Abu Dhabi assists the other emirates of the federation is through the Abu Dhabi Development Fund, whose capital was doubled to $4.3 billion in August this year and remit was expanded to cover the entire country. Even though Abu Dhabi’s share in the federal budget today is less than its historic 100%, the total amount in dollars is considerably higher than in previous years because of the federal government's considerable increase in size and the fact that projects that were initially funded by Abu Dhabi had started contributing to the federal budget on a stand-alone basis.

While attention is to be focused on Abu Dhabi’s aid to other states, its generosity to the other emirates of the federation is even larger and more noteworthy.

Sultan Sooud Al Qassemi is a commentator on Arab affairs. On Twitter: @SultanAlQassemi

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