Shifting from a culture of dependency

Written by Guy Burton on 16 April 2019 in Opinion
Opinion

European businesses should take notice of UAE’s drive to foster entrepreneurship, says Guy Burton.

Photo credit: Press Association


Uber’s purchase of rival ride sharing service Careem was big news last month after it shelled out $3.1bn for the Dubai-based firm.

This deal, alongside three requests for mergers between large Emirati and European companies filed since November, accompanies the €49bn in trade between the UAE and EU last year.

These are just the latest developments in an increasingly international drive hailed by Dubai’s Sheikh Mohammed as vindication for his decision to encourage an internet and e-commerce industry.


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More broadly, this draws attention to the efforts being made by the UAE and Dubai to build a business-friendly environment that encourages the creation and development of new enterprises.

The news about Careem was also significant because of its association with the sharing economy. It arguably makes the firm a type of social enterprise that straddles the divide between pure commercial self-interest and having a social mission that goes beyond the profit motive.

This model has traditionally only existed in Western markets, but is now gaining traction across the Middle East.

Social enterprises and social entrepreneurship form part of the UAE government’s wider strategy to encourage and stimulate business investment and activity.

Over the past decade, the federal government in Abu Dhabi has devised complementary strategies to encourage more entrepreneurship.

The country’s leaders recognise the need to diversify the economy, an issue that is becoming more evident across the Gulf region, with neighbouring countries such as Saudi Arabia and Kuwait proposing similar plans over the last decade.

For the wealthiest emirate, Abu Dhabi, the aim is to reduce its economic reliance on oil and gas production and revenue.

“These are just the latest developments in an increasingly international drive hailed by Dubai’s Sheikh Mohammed as vindication for his decision to encourage an internet and e-commerce industry”

In Dubai, the city aims to build on its history as a trading and business hub. As shown by the Careem example, this presents major growth opportunities for EU businesses. 

Another reason for future planning is the need to accommodate the needs and demands of the country’s growing and youthful population.

The UAE’s median age is 30 years compared to 45.8 in Germany, 41.2 in France, 40.5 in the UK, 36.6 in Ireland, and 42.6 years across the EU more generally.

There are over 9.5 million people living in the UAE, half of whom arrived between 2000 and 2010. Today expats account for 88 percent of the population and occupy most of the jobs in the productive private sector. The government is keen to improve this ratio.

Other measures aimed at helping start-up businesses and social entrepreneurs get off the ground and expand include incubator and accelerator programmes.

The government has also set up the Emirates Foundation in Abu Dhabi which provides training and mentoring, particularly for the young.

In January the Department of Community Development was also set up in Abu Dhabi and aims to help social businesses as part of its remit.

In Dubai the Executive Council established the Dubai Future Accelerator Programme in 2016. A year later it incorporated a social dimension into its activities and focused on humanitarian-focused start-ups.

For social entrepreneurs there is also the long-running, volunteer-run C3 (Cause & Coach for a Cause). Set up in 2012, it is currently running its accelerator programme for the sixth time and has won an International Social Enterprise Mark for its work.

Based in Dubai, with a network of 1000 experts across seven different countries in the region, the programme has helped over 250 entrepreneurs and likely contributed to the UAE being ranked 19th overall and second in the Middle East after Israel as the best place to be a social entrepreneur, by the Thomas Reuters Foundation in 2016.

“Last year the UAE was also ranked 11th in the World Bank’s global rankings for the ease of doing business, placing its first in the region”

Anna-Liisa Goggs, one of C3’s founders, points out that the legal framework in the UAE means that social enterprises “need to be set up as for-profit businesses with their social purpose bolted on. On the positive side this makes social businesses more likely to be competitive and focused on their growth and scalability to secure investment… this is exactly the type of businesses that many impact investors are looking for”. The governments’ efforts are starting to make a difference. 

While much of the region is swept up in the political unrest and turmoil that followed the 2011 Arab uprisings, the UAE is seen as a relatively stable place to do business.

It is also less susceptible to corruption and provides more regular electricity and has enabled greater access to finance and credit while also reforming its education sector – all areas that other countries in the region have struggled to achieve according to a 2016 survey by the European Bank for Reconstruction and Development, the World Bank and the European Investment Bank.

Last year the UAE was also ranked 11th in the World Bank’s global rankings for the ease of doing business, placing its first in the region.

In time the UAE’s ambitious efforts to diversify its commercial activities should foster a more entrepreneurial culture in the country.

This should see it well placed to tackle the twin challenges facing most countries in the region: reducing the reliance on revenues associated with energy production and the state’s growing inability to be a principal provider of jobs and opportunities.

 

About the author

Guy Burton is a Visiting Fellow at the LSE's Middle East Centre

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