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Harvard Case - Mubadala: Forging Development in Abu Dhabi

"Mubadala: Forging Development in Abu Dhabi" Harvard business case study is written by Rawi Abdelal, Irina Tarsis. It deals with the challenges in the field of Business & Government Relations. The case study is 36 page(s) long and it was first published on : Nov 28, 2007

At Fern Fort University, we recommend that Mubadala continue its strategic approach of leveraging public-private partnerships, foreign direct investment, and innovation to drive economic diversification and sustainable growth in Abu Dhabi. This strategy should be further strengthened by focusing on key areas such as infrastructure and urban development, technology and analytics, and environmental sustainability.

2. Background

The case study focuses on Mubadala Investment Company, a sovereign wealth fund established by the government of Abu Dhabi. Mubadala plays a crucial role in driving economic diversification and sustainable development in the emirate, particularly in response to the decline in oil prices.

The main protagonists are:

  • Mubadala Investment Company: The government-owned investment fund responsible for diversifying Abu Dhabi's economy.
  • The Government of Abu Dhabi: The entity responsible for setting the overall economic policy and providing strategic direction to Mubadala.
  • International investors: Key stakeholders who contribute to foreign direct investment in Abu Dhabi's projects.

3. Analysis of the Case Study

Mubadala's success can be analyzed using a framework that combines strategic planning, corporate social responsibility, and international business principles.

Strategic Planning:

  • Diversification Strategy: Mubadala's strategy of diversifying away from oil and gas is crucial for long-term economic stability. This involves investments in various sectors like aerospace, healthcare, and technology.
  • Public-Private Partnerships: Mubadala's use of public-private partnerships allows it to leverage private sector expertise and capital while maintaining government control over strategic projects.
  • Foreign Direct Investment: Mubadala actively attracts foreign direct investment to Abu Dhabi, bringing in capital and expertise to support its development goals.

Corporate Social Responsibility:

  • Sustainable Development: Mubadala's investments are increasingly focused on environmental sustainability, promoting clean energy and sustainable infrastructure projects.
  • Social Impact: Mubadala recognizes the importance of social impact and invests in projects that benefit the local community, such as healthcare and education initiatives.

International Business:

  • Globalization: Mubadala operates on a global scale, investing in companies and projects across various countries. This strategy allows it to access new markets, technologies, and talent.
  • Emerging Markets: Mubadala's investments in emerging markets like Africa and Asia demonstrate its commitment to supporting economic development in these regions.

4. Recommendations

To further enhance its strategy, Mubadala should:

  1. Strengthen Infrastructure and Urban Development: Invest in projects that improve transportation, logistics, and urban planning to attract businesses and create a more attractive investment environment. This includes developing smart cities, improving public transportation, and enhancing logistics infrastructure.
  2. Focus on Technology and Analytics: Invest in research and development, incubators, and startups in areas like artificial intelligence, big data, and cybersecurity. This will create a knowledge-based economy and attract talent to Abu Dhabi.
  3. Promote Environmental Sustainability: Prioritize investments in renewable energy, sustainable infrastructure, and green technologies. This will position Abu Dhabi as a leader in environmental sustainability and attract environmentally conscious businesses.
  4. Enhance Public-Private Partnerships: Develop a more robust framework for public-private partnerships, attracting private sector investment and expertise while ensuring transparency and accountability.
  5. Strengthen Corporate Governance: Implement robust corporate governance practices to ensure transparency, accountability, and ethical behavior across all investments.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  1. Core Competencies and Consistency with Mission: The recommendations align with Mubadala's core competencies in investment management, infrastructure development, and technology. They also support the company's mission to drive economic diversification and sustainable growth.
  2. External Customers and Internal Clients: The recommendations cater to the needs of external customers, such as international investors, and internal clients, such as the government of Abu Dhabi.
  3. Competitors: The recommendations position Mubadala to compete effectively with other sovereign wealth funds and investment companies by focusing on key areas like innovation, sustainability, and infrastructure development.
  4. Attractiveness: The recommendations are expected to generate positive returns on investment through increased economic activity, job creation, and improved quality of life in Abu Dhabi.

6. Conclusion

Mubadala has successfully positioned itself as a key driver of economic development in Abu Dhabi. By continuing its strategic approach of leveraging public-private partnerships, foreign direct investment, and innovation, while focusing on key areas like infrastructure and urban development, technology and analytics, and environmental sustainability, Mubadala can further enhance its impact and contribute to the long-term prosperity of Abu Dhabi.

7. Discussion

Other alternatives considered include:

  • Focusing solely on oil and gas: This would be a risky strategy given the volatility of oil prices and the need for long-term economic diversification.
  • Privatizing Mubadala: This could lead to a loss of government control over strategic investments and potentially impact the emirate's economic development goals.

The key assumptions underlying the recommendations include:

  • Continued political stability in Abu Dhabi: Political instability could negatively impact investment and economic growth.
  • Availability of skilled labor: Attracting and retaining skilled labor is crucial for success in areas like technology and innovation.
  • Global economic growth: A global economic downturn could negatively impact foreign direct investment and overall economic activity.

8. Next Steps

To implement the recommendations, Mubadala should:

  • Develop a detailed strategic plan: This plan should outline specific investment priorities, timelines, and performance metrics.
  • Establish partnerships with key stakeholders: This includes collaborating with international investors, private sector companies, and research institutions.
  • Implement robust governance and risk management practices: This will ensure transparency, accountability, and efficient allocation of resources.
  • Monitor progress and make adjustments as needed: Regularly evaluating the effectiveness of the strategy and making necessary adjustments is crucial for continued success.

By taking these steps, Mubadala can solidify its position as a leading driver of economic growth and sustainable development in Abu Dhabi, contributing to the emirate's long-term prosperity and global competitiveness.

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Case Description

In 2007, Khaldoon Khalifa Al Mubarak, the CEO of Mubadala Development Company (Mubadala), had every reason to be optimistic about the future of his home, Abu Dhabi, one of the emirates comprising the United Arab Emirates (UAE). The tiny, sandy, and dry emirate with a population of 1.5 million, only 420,000 of whom were citizens, was nestled upon nearly 10% of the world's known reserves of oil and the 4th largest proven reserve of natural gas. With the price of oil doubling every 10 years between 1970 and the 2000s, the state-owned Abu Dhabi National Oil Company (ADNOC) had enjoyed an era of increasing profitability. Another state-owned firm, Abu Dhabi Investment Authority (ADIA), had been investing extra oil revenues outside of the county for more than 30 years, and the intensely secretive organization had amassed assets worth an astonishing--and still rapidly growing--$500 billion to $900 billion. A common refrain held that Abu Dhabi nationals could live off of the returns generated by ADIA forever. Some accordingly referred to the emirate as "the richest city in the world." Yet Al Mubarak, trusted advisor to the crown prince Mohamed bin Zayed Al Nahayan, and Mubadala were charged with transforming the economy of the emirate. Many were concerned that Abu Dhabi was in danger of suffering from the so-called "resource curse," as its economy focused on fossil fuels and little else. Not only would Abu Dhabi's economy continue to be subjected to the vagaries of world energy prices, there would be little for its citizens to do. Not everyone could work for ADNOC or ADIA. Not everyone was from one of Abu Dhabi's handful of incredibly wealthy families. To be a developed country, Abu Dhabi needed change. Fortune had already played perhaps too large a role.

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