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Middle East and North Africa / UAE

How Abu Dhabi is supporting innovation to build a sustainable economy

A healthy innovation ecosystem is an increasingly vital element in attracting overseas investment. Creating an innovation-friendly economy is something that Abu Dhabi has placed at the heart of its future development strategy.

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Khalifa University’s Masdar Institute was involved in supporting the UAE space agency’s project that successfully landed a probe on Mars earlier this year. (Photo by petrvocelka/Shutterstock)

Innovation is crucial to economic growth, and countries that wish to thrive must find ways to nurture it. In the 2019 paper ‘Innovation in Abu Dhabi’, the Abu Dhabi Chamber recognises this imperative, identifying a number of characteristics that make for an innovation-friendly economy. Important factors include incentivising research and development (R&D), prioritising training and education, facilitating collaboration between academia and industry, and simplifying policy. All of this must be supported by both investment and a culture that favours the innovative.

The challenge

The United Arab Emirates (UAE) is rich in natural resources and enjoys the benefits of a high-income economy, making it an attractive prospect for innovators and investors. The challenge for Abu Dhabi, according to Tariq Bin Hendi, director-general of the Abu Dhabi Investment Office (ADIO), is to manage those resources and to build a sustainable economy for the post-oil future. “There is a really exciting opportunity for Abu Dhabi as we head into a world that is more sustainability focused,” he predicts. “As a forward-looking economy, innovation is central to our economy. We have built an exciting entrepreneurial business ecosystem that has really taken root here. It means the prospects for companies that invest here are exciting.”

Over the last decade, diversifying the economy and developing an ecosystem that supports and rewards innovation have assumed an increasingly central position in Abu Dhabi’s long-term vision, with the introduction of significant investment and financial incentives by a range of organisations being supported by legislative changes.

Investment and incentive

Innovation has become a national priority for the UAE as a whole. The country invests $3bn in innovation each year. As far back as 2014, its National Innovation Strategy (NIS) aimed to make the UAE one of the world’s most innovative countries within seven years. In 2018, the strategy was updated to prioritise future skills, health, green power and transport.

Abu Dhabi’s Economic Vision 2030, which was announced in 2007, has innovation at its core, focusing on areas including the private sector, knowledge-based economy, transparent regulation, education, values and culture. It promotes infrastructure projects and collaboration with academic institutions, which positions Abu Dhabi to embrace innovative technologies.

The three-year Ghadan 21 accelerator programme was announced in 2018 and is worth AED50bn ($13bn) in investment in “business, innovation and people”. It launched more than 50 initiatives in its first year, and key initiatives were fast-tracked in 2020 in order to respond to the economic disruption caused by the Covid-19 pandemic. The programme has made significant progress preparing the economy and its workforce for the challenges and opportunities of the fourth industrial revolution.

ADIO is central to the emirate’s efforts. Its AED2bn ($545m) innovation programme provides financial and non-financial incentives to innovative businesses in high-growth areas, supporting their establishment and growth in Abu Dhabi. It also connects global companies to relevant partners across Abu Dhabi’s innovation ecosystem, helping them to realise ambitious opportunities.

Legislative measures

Regulation is another key tool for facilitating a thriving innovation market. For example, the Abu Dhabi Instant Licence was established under Ghadan 21 to simplify the process of applying for a licence to conduct commercial activity.

Abu Dhabi is also home to a number of free zones, which allow 100% foreign ownership and full repatriation of capital and products. This attracts foreign investors and promotes the development of industry clusters, in which like-minded businesses can support one another. The Abu Dhabi Global Market (ADGM) independent jurisdiction allows fintech and retail bodies to thrive, the Khalifa Industrial Zone offers world-class transportation infrastructure, Masdar City focuses on energy and twofour54 on media companies.

Talent and the knowledge economy

Innovation relies on attracting thinkers with the ability to pioneer. The UAE’s NIS promotes collaboration between universities and industries; for example, Khalifa University’s Masdar Institute was actively involved in supporting the UAE space agency’s project that successfully landed a probe on Mars earlier this year.

Hosting international talent relies on the ability to attract and accommodate expatriates. According to the 2021 Expat Insider study by InterNations, the UAE is among the top 20 countries for expatriates to live and work in, with respondents highlighting features including quality of life, safety and transportation.

Abu Dhabi aims to become a global hub for top talent. The Thrive in Abu Dhabi 2021 programme offers ‘Golden Visas’, a pathway to citizenship for international investors and talent including scientists, innovators and inventors. Abu Dhabi’s Research and Development Authority (ADRDA) is developing an innovation lab, which aims to attract the world’s best researchers.

Aiming to develop a world-leading R&D ecosystem in Abu Dhabi and the UAE, the Advanced Technology Research Council is a future-focused organisation that prioritises attracting and retaining global research talent. Since its establishment in 2020, the organisation has consolidated investment funding and driven policy and regulation to facilitate research across academia, with the objective to “solve tomorrow’s challenges today”. It comprises two pillars: its applied research Technology Innovation Institute and ASPIRE, which focuses on programme management.

A world-class environment

Today, the UAE boasts a strong culture of innovation and a diversified economy, thanks to sustained efforts over the last decade and the strategic reinvestment of oil and gas revenue. This is illustrated by the nation’s steady ascent through the Global Innovation Index rankings. In 2020, it ranked 36th globally and first in the Arab world.

Innovation is stimulated by business support, transparent regulation, talent and conducive infrastructure. Abu Dhabi ranks top in the Middle East for ease of doing business, with 0% corporation tax and 0% income tax attracting investors and talented individuals. The competitive corporate tax structure also frees up revenue to be reinvested in innovation.

Efforts to stimulate the knowledge economy in Abu Dhabi have led to the development of world-class education facilities including the Mohamed bin Zayed University of Artificial Intelligence, the world’s first AI university, and the city’s free zones have boosted knowledge economy start-ups. Abu Dhabi’s ADRDA has become a world-class R&D ecosystem. UAE Ministry of Economy figures reveal that between 2014 and 2018, the information and communications sector grew by 26.2% and education by 28.2%.

The market enjoys a healthy combination of local, international, leading and emerging businesses, with micro, small and medium enterprises (MSMEs) comprising 98% of companies in Abu Dhabi, promising long-term growth. The economy has also diversified away from its roots, with non-oil sectors now comprising 60% of the UAE’s GDP. The digital economy currently contributes 4.3%, and this is expected to rise as e-commerce and digital government services are further embraced.

Champion sectors

Development initiatives are most effective when they are targeted, and the ADIO Innovation Programme, launched in 2020, identifies a number of future-facing sectors to be prioritised.

Financial services

Home to the Abu Dhabi Investment Authority, First Abu Dhabi Bank, ADGM, 120 financial service providers and the region’s only digital sandbox for financial services, Abu Dhabi is well placed to support innovation in the financial services sector. The Abu Dhabi Innovation Challenge is held every year and brings together fintech talent. This area has seen huge growth in recent years, and the trend is expected to continue.

Tourism

Tourism is rapidly developing in Abu Dhabi. The sector receives more than $7bn in investment per year and is projected to grow by more than 5% annually over the next decade. Through support for innovation in tourism, ADIO aims to develop Abu Dhabi into a world-class destination.

AgTech

Abundant sunshine and land availability as well as a growing population present opportunities for innovation in the AgTech sector. In 2020, ADIO formed partnerships with seven AgTech pioneers to establish new R&D and production facilities in Abu Dhabi with the aim of developing cutting-edge solutions and technology that can benefit the agriculture ecosystem in the region and beyond.

ICT

Information and communications technology (ICT) is key to smart growth. Abu Dhabi is currently a leader in ICT innovation, having been recently named the smartest city in MENA and being the world’s first capital city to achieve 100% broadband connectivity to the home. In 2021, ADIO has forged individual partnerships with ICT leaders, including AWS, Anghami and Bespin, to bring their world-class technology to Abu Dhabi and the region. Improvements in ICT capabilities can unlock opportunities for all other innovation-focused sectors.

Health

A number of institutions aim to stimulate innovation in the health industry. In 2017, Abu Dhabi’s Department of Health announced an additional AED30m ($8m) investment in innovation. In 2019, the Department of Health launched the Genome Project to improve health and well-being using AI. Healthcare is also a key strategic pillar for the UAE NIS and Abu Dhabi’s Economic Vision 2030, and Abu Dhabi has already attracted several leading international healthcare organisations, including the Mayo Clinic and the Cleveland Clinic, as well as investing heavily in world-class research facilities.

Abu Dhabi’s approach to innovation will continue to be future facing. As the Economic Vision 2030 approaches its completion date, leading institutions will identify continuing trends, with knowledge, ideas and innovation set to become only more important.