Abu Dhabi Ex-Im bank an idea whose time has come

Abu Dhabi is to establish a new agency to provide cheap credit for exports by the end of the year modelled on the US Export-Import Bank, the bank at the centre of controversy over subsidies to Gulf airlines for the financing of purchases of Boeing aircraft, according to The National today.

This new Abu Dhabi export promotion agency would provide financial support and advice to local companies planning to export goods and services. That might well include airlines like Etihad and Emirates looking to export their services to new destinations.

Ex-Im backing

Apparently representatives from the Abu Dhabi Department of Economic Development met with the management of the US Ex-Im Bank last week to discuss the idea. It is unclear whether the new agency will be a federal institution, assisting the whole UAE or confined to Abu Dhabi.

It would be a big mistake to do this. Since the global financial crisis struck the UAE two years ago there has been an acceleration of cooperation between the seven separate emirates, most dramatically with Abu Dhabi’s $20 billion support of Dubai last December.

With its Middle East super-port at Jebel Ali, home to some 6,500 export companies, it is vitally important for the future of the country to stimulate exports from both Dubai and Abu Dhabi. Indeed, without Dubai the new agency would have few exports to promote as the label ‘Made in Abu Dhabi’ is pretty unusual as most of the leading emirate’s export revenues come from oil.

Dubai is the export hub

So the new Abu Dhabi Ex-Im Bank needs Dubai to find a role. Otherwise it will struggle to do anything meaningful for the local economy and be largely an irrelevance.

For Dubai is the emirate with the export and re-export infrastructure in place and up and running, not Abu Dhabi. That may change over time, although Abu Dhabi’s ambitions in the past to challenge Dubai in this space have come to nothing, and floundered on basic issues like cost advantages and access to expatriate labour.

Surely Abu Dhabi is best advised to play this role at the federal level, pumping cheap finance into the local economy for the benefit of the whole nation. Abu Dhabi should surely concentrate on developing its oil and gas reserves, and alternative energy where it has a clear competitive advantage rather than building up an export sector that will always be cross-subsidized at the expense of the energy sector.