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Abu Dhabi green city the start of a new Middle East energy vision

November 8, 2011 1 comment

If Abu Dhabi were a canvas, few painters would consider using “green” to paint the skyscraper-clad urban desert oasis. Sure, the rich United Arab Emirates city pumps artificial green into its oven of a climate — tree-lined boulevards, expansive golf courses and other vegetation that could never survive without plundering a tremendous amount of resources give the metropolis a more Western feel.

Maintaining this Middle Eastern fantasy ecosystem comes at a heavy environmental and social price. Environmentalists last year warned, “the country, already reliant on costly desalination plants powered by its lucrative fossil fuels, must cut consumption by its 8.2 million people or risk depleting groundwater resources in 50 years,” according to a Reuters report.

It appears Masdar City, an Abu Dhabi community, took that message seriously. Masdar aspires to be the world’s first zero-carbon community and hopes waste timber will earn it that distinction. Masdar also will use native plants in landscaping, which require one-third the amount of water compared with Abu Dhabi’s penchant for unsustainable, unnatural flora. The city intends to divert 50 percent of all waste from landfills by recycling and reusing timber and other materials in the project’s first phase.

Sustainability practices are the first step in attracting research and business opportunities in other energy fields, especially for a region like the Gulf Coast. With European energy markets already more mature and those economies lacking the capital to initiate expensive, advanced projects, energy firms are looking toward emerging economies in the Middle East, Latin America and Asia Pacific for investment.

Scotland struck a deal with Masdar City on Monday to support  university research and other initiatives. That deal is potentially worth billions of dollars, Scottish First Minister Alex Salmond said:

“I firmly believe this agreement will yield great results for Abu Dhabi, great results for Scotland, and I do believe it will lead to significant advances that will benefit this entire planet. That’s the importance of what’s been talked about.”

As I’ve said in this space many times before, Middle Eastern nations must diversify their energy economies. That will that help avoid dependence on state-owned oil c0mpanies that prone to corruption. It also will provide a place for investment dollars, as energy firms are simply waiting for the next market to pop up so they can do something with all their money. In turn, that will spur research institutions — possibly leading to patents and valuable innovation — in Middle Eastern nations that desperately need to create skilled jobs for its educated, underemployed and young citizens.

The Middle East, with its well-documented dependence on fossil fuel production as a main economic driver, is an embryonic energy market. Energy pioneers there realize the benefits of technologies like PV solar, but too few people in the region have enough understanding of the technology for any sort of renewable energy movement momentum. However, investors will be more than ready when that momentum builds.

The Masdar City project is a good start, as it will get people in the region thinking about renewable energy and sustainability. Already, Masdar Institute, a graduate-level university focusing on renewable energy and sustainability, hosted a meeting with 12 UAE universities about joining the European Union-Gulf Cooperation Council (EU-GCC) Clean Energy Network. That organization strives to “build a functional partnership and extensive new networks relevant to renewable energy sources, energy demand side management and energy efficiency, clean natural gas & related clean technologies, electricity interconnections and market integration; as well as carbon capture and storage.”

The Middle East needs a new energy picture. It’s time to paint the region green.

UAE changes could lead to growth, rising property values

The UAE made changes to how it buys and sells government real estate, responding to reports that Dubai real estate values are expected to drop between 10 and 20 percent.

The gulf nation continues to reel from the global financial fallout as it canceled 217 real estate development projects during the past two years — about half of the nation’s proposed projects.

But Sunday’s changes in how the state deals with real estate should give the nation more financial stability and could lead to growth.

From ArabianBusiness.com:

Legal amendments, announced Sunday, will allow DREC to sell off state-owned real estate and allow the agency to sue and be sued in dealings with third-party players.

By consolidating government real estate and planning into a large commercial body, Dubai will be able to build more for less money due to economies of scale. Additionally, bringing asset management out of government hands and into private control will enable greater borrowing and investment because corporations have more fiscal flexibility than governments. Corporations are more adept at handling debt, and the UAE has a bit too much of that right now to take on any more. The unwillingness to take on more debt will stall growth, so transferring some of the state real estate market to a private corporation makes some sense.

Property transactions fell to $32.5 billion at the end of last year from $41.6 billion the previous year — a 21.9 percent drop.

Of course, the  Hesham Abdullah Al Qasim, vice president and chief executive officer of DREC, already has said it will not sell government properties.

“While DREC is completely into the leasing market, and the amendments to the law now allow selling government properties, there is, however, no intention to sell any of these assets or even to go to the stock market,” he said.

I would hope this is just political posturing by the DREC so as not to alienate its new government partners. Analysts said the changes will help stimulate “sound urban planning, financially viable development and generally better economies of scale,” and will give government “an opportunity to strip off excess fat and create individually-focused business lines that are more commercial in their approach.” But that’s only if DREC takes full advantage of the changes.

The hope here is that better urban planning can elevate property values. In general, property values in poorly planned areas — such as rural communities or in an aging, blighted city center — are lower.

The UAE real estate market is in shambles. Office rents in Dubai and Abu Dhabi have dropped 69 percent and 45 percent, respectively. Residential prices in Dubai fell 56 percent from the fourth quarter of 2008. Abu Dhabi residential prices have declined 45 percent since then.

Getting more economic development through state-led urban growth could restore property values. That’s the goal here.

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