UAE – Resetting for future prosperity

The United Arab Emirates has not been short of opportunity for the investment-minded during its short 50-year history. But although it has thrived in recent years as a diverse economy which has successfully embraced consumerism to become a powerhouse trading hub in the MENAT region. 

New shifts in its economic and regulatory focus will now see the country rebuild on innovation and technology, fuelled by high-quality talent with the incentive to be in the country for the longer haul.

A cursory glance at the UAE is all it takes to see that the country holds a less orthodox approach to growth and economic policy than its Arab neighbours. Unlike other Gulf nations, the UAE has not had the level of hydrocarbon reserves to fall back on in its journey to become a developed, global economy of real influence. Other policies have been more calculated, such as nurturing its appeal as an international retail, consumer and tourism paradise or promoting its low-tax, foreign-business-friendly trading hub status to oil the wheels of its growth.

Simon Williams, HSBC’s Chief Economist for the Middle East, explains how the scene has been set over previous decades, arguing that it is a compelling regional success story. “In terms of its scale, the UAE is not as big as neighbouring Saudi Arabia but it's much, much larger in economic scale than the other parts of the Gulf Cooperation Council region – and up to three times the size of the Qatari economy,” he says.

The way they have achieved that, he argues, is more than just shrewd commercial practice. Decisive leadership and policy moves have also been at the heart of the UAE story. “These leadership and policy decisions,” he says, “were taken early. If the country was going to be serious about diversifying the economy, it was imperative to build the kind of business environment within which the non-oil sectors of the economy could actually flourish. This has now given it a significant lead over many of its regional peers, as well as other competing emerging markets.”

The onset of Covid-19 has since disrupted the upward trajectory, however. This, coupled with a drop in oil prices, did bring a “sharp fall-off in economic activity” for the country, and yet – according to Simon – the ease with which it has maintained access to debt funding and taken control over the coronavirus locally is testament to how well the UAE will deal with the next economic cycle.

A calculated realignment

Far from battening down the hatches during the pandemic, the UAE has taken the opportunity to redouble its efforts to secure capital revenue at home and abroad. This is part of a conscious realignment towards a more future-proof economy that is attractive to smaller and medium-sized innovator businesses as well as the ‘traditional’ larger corporations.

Andrew Tarbuck, Partner & Head of Capital Markets at legal firm Al Tamimi & Co, has observed how a brace of regulatory realignments at the end of 202o has been reflected in “the most prolific quarter for issuance of law and regulation in any jurisdiction I have seen”. He points to four developments of significance to foreign businesses and investors that have potential to change the game.

The requirement to have a minimum number of Emiratis on foreign company boards has, with a few strategic sector exceptions, been removed, while foreign companies no longer need a local service agent to open a branch. Free zones, too, can now enjoy 100% foreign company ownership, and businesses can opt to list on the new Nasdaq Dubai Growth Market if their market cap is under $250m.

“The corporate scene in the UAE is particularly vibrant,” says Andrew. “There has been a huge uptick in venture capital fund creation and deployment, particularly in tech - health tech, education tech and fintechs. The VC scene has also rocketed in the last 18 months to two years.”

Add to this the introduction of ‘Golden’ or Retirement Visas for expats, and it’s clear that the long-term deployment of foreign talent and wealth, will help define the UAE’s future success.

Showcasing the new UAE

If there’s one surefire way to declare to the world your intentions as an emerging economy, it’s through an Expo. Dubai’s Expo 2020 – now to be a mix of the physical and virtual following the pandemic – will be one of the largest events ever held in the Arab world, adding around 1.5% to the UAE’s GDP and creating around 50,000 jobs, according to HSBC’s Head of Commercial Banking for MENAT, Dan Howlett.

“This is an Expo that will connect sea, land and air with state-of-the-art mobility, helping international businesses to thrive,” he explains. “It will be a key driver, putting not just the UAE but the whole Arab world on the global stage.”

Greg Clark, HSBC’s Senior Advisor on Future Cities & New Industries, certainly agrees: “Countries and whole regions tend to use the device of hosting the world when they want to begin a new cycle of development and reform.

“Dubai, for example, is now aligning much more closely with innovation, health and technology,” Greg adds. “This is a decisive pivot towards an indigenous economy that is trying to serve the world with the things that the world needs, such as health, reformed energy systems, food, tech and sustainability.”

So what are the stand-out features that businesses looking to invest in the UAE should be looking for?

Andrew reiterates the importance of tech, saying that the standard of innovation there is without question. The challenge now, is to retain the talent that makes it happen.

Smart cities with integrated digital infrastructure will also drive the increasing attraction of the UAE to entrepreneurial businesses, according to Greg. “The UAE is on a very fast curve up this urban tech parabola, and it will eventually become a leader in this space,” he predicts.

Then there’s the sustainability factor, increasingly setting the agenda across the globe. The UAE is a natural fit for solar and renewables, says Dan, who predicts a lead role for the country in this as well as green hydrogen.

Whatever the future holds, the UAE intends to shape it rather than react to it. What was previously all about corporates and consumerism, will now be about a shift to a more diversified, bottom-up, entrepreneurial economy than before.

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