Transformation to a knowledge-based economy in the GCC:
Leveraging Existing Strengths
Transformation to a Knowledge-Based Economy in the GCC:
Leveraging Existing Strengths
MacroTrends Conference on Business and Social Science: Nice
2016, 20-21 June, Nice, FranceAlexandros Papaspyridis,
PhD*Director, Lumia Commercial Sales, Greater Asia, Middle-East
& Africa (GAMEA)Microsoft Mobile Device SalesMicrosoft Gulf LLC
| Building 8 |Dubai Internet CityTel +971 555 926 708E:
[email protected]*The views expressed are his own and do not
necessarily represent the views of Microsoft Corp.
Tatiana Zalan, PhDAssociate Professor of Management, American
University in Dubai, Media City, UAETel : +971 4 318 3341E :
[email protected]
Agenda Background and motivation for the paperKnowledge economy
definitions, characteristics and measurementThe UAE and Qatars
international standing on knowledge economy metricsKey priorities
and actions
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Oil dependence
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The end of oilGulf Economies such as the UAE have prospered not
only due to oil revenues but primarily due to a successful
Government-led developmental model that has driven GDP growth
averaging 4.8% from 2000 to 2014 (www.tradingeconomics.com). Oil
receipts are now down in excess of 60%, exerting negative pressures
in the GCCKSA wants to generate $100 billion per year in non-oil
revenue.Dubai feels the impact of reduced oil revenues in the
GCC.Study by Harb (2008) on the long and short-run relationship
between oil exports, non-oil GDP and investment in five major GCC
oil exporting countries suggests that an economys poor performance
is not caused by a fall in oil revenues;other factors particularly
the quality of education and institutions may affect economic
growth.
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Innovation is key to sustainable growthWorld Bank Report (2013)
shows that the relationship between competitiveness (GCI) and KEI
is weaker in the GCC than the rest of the worldKnowledge economy
factors play a smaller role in those countries, given their level
of competitiveness.This is problematic in the light of the current
pressures to create rewarding employment opportunities for GCC
nationals outside the public sector.GCC countries have identified
innovation and transitioning to a knowledge-based economy as
critical components of sustainable growth (Ibrahim, 2010; Tadros,
2014; Hvidt, 2015).The UAE has set as part of its Vision 2021 to
become the economic, tourist and commercial capital for more than
two billion people. Qatar Vision 2030, the CEO of Qatar Foundation
has recently called for a significant research investment
boost.7
What is a knowledge economy? 8Economic success is increasingly
based on the effective utilisation of intangible assets such as
knowledge, skills, and innovative potential as the key resource for
competitive advantage. The term Knowledge Economy is used to
describe this emerging economic structure (Work Foundation, UK).Key
characteristics of knowledge and knowledge-based economy:Knowledge
has positive externalities (spillovers, increasing returns, network
externalities);Knowledge has low excludability and rivalry public
good;The primary basis for competition for rims is innovation (vs
price);Consumers must be unhindered by distortions (trade barriers,
discriminatory taxes);Entrepreneurs capture a large proportion of
the profits they produce, profits are a reward for risk; A
successful knowledge based economy has a high bankruptcy rate and
an active M&A market;The social consequences of a knowledge
economy is an uneven income distribution.
Assessing performance as a knowledge economy If you cannot
measure it, you cannot improve it (Lord Kelvin) Set internationally
measured key performance indicators (KPIs)Define a roadmap of how
these KPIs should evolve; Assess progress against these
international rankings on a regular basis in order to define
corrective actions.We look at data for five economies for which we
can draw meaningful comparisons: the UAE and Qatar from the GCC;
and a benchmark group comprising three countries: Singapore, an
economy often quoted as a role model for the GCC; Norway, a country
with significant wealth from oil; Switzerland, a small, wealthy,
globally competitive economy with few natural resources that has
built its success on innovation. Qatar had the highest GDP growth
p.a. over the 10-year period from 2004 to 2014.
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Singapore is a relevant benchmarkSingapore ranks No 4 by the
World Competitiveness Report (IMD, 2016)A relevant model of
government-led, innovation-driven development.Singapore has enjoyed
an average 5.3 % annual GDP growth in the last 10 years. Singapore
is investing heavily in selected high technology areas (e.g.,
biotechnology, aerospace)Attracting star academics from abroad,
encouraging private investments by MNCs;Ensuring knowledge
spillovers through commercialisation agencies while maintaining its
high commitment to indigenous innovation and R&D through
substantial public investments.
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Knowledge economy metrics World Bank11
The Knowledge Economy Index is an economic indicator developed
by the World Bank Institute to measure a countrys ability to
generate, adopt and diffuse knowledge .
The four pillars: An economic and institutional regime to
provide incentives for the efficient use of existing and new
knowledge and the flourishing of entrepreneurship; An educated and
skilled population to create, share, and use knowledge well; An
efficient innovation system of firms, research centers,
universities, consultants and other organizations to tap into the
growing stock of global knowledge, assimilate and adapt it to local
needs, and create new technology; Information and communication
technology to facilitate the effective creation, dissemination, and
processing of information.
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International Standing absolute values and rank 200812
The UAE has adopted a comprehensive and quantifiable framework
(going beyond the KEI) as part of its Vision 2021 and it clearly
stands out globally by doing so. The KPI framework uses both
internationally defined metrics (e.g. by World Bank, World Economic
Forum, Insead) as well as locally defined metrics. While the UAE
has set this as a North Star for 2021, the framework needs to be
augmented by an annual roadmap of how the metrics should evolve
over time to reach the 2021 objectives and, therefore, an
indication of how well the targets are converging. Looking at the
World Bank KEI data for 2012 (latest available with an update is
scheduled for this year), we see that the benchmark group has a
median subindex ranking of 15.5, while the GCC 56. In each of the
benchmark economies, 2 out of 4 indices are in the top-10
worldwide. The GCC group lags on economic incentive regime,
innovation (the biggest gap) and education, while the smallest gap
is on ICT. Comparing to the 2008 data, the UAE is almost unchanged
in rankings (42nd but improved in absolute values), Qatar slipped
24 positions (54th and slipped in absolute terms), Singapore is
unchanged (23rd), Norway slipped 5 positions (5th) and Switzerland
slipped 7 positions (10th). Looking at the sub-indices, the UAE
improved in education and ICT, slipping on EIR and innovation.
Qatar improved on EIR and slipped on education, innovation and
ICT.
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International Standing absolute values and rank 201213
The UAE has adopted a comprehensive and quantifiable framework
(going beyond the KEI) as part of its Vision 2021 and it clearly
stands out globally by doing so. The KPI framework uses both
internationally defined metrics (e.g. by World Bank, World Economic
Forum, Insead) as well as locally defined metrics. While the UAE
has set this as a North Star for 2021, the framework needs to be
augmented by an annual roadmap of how the metrics should evolve
over time to reach the 2021 objectives and, therefore, an
indication of how well the targets are converging. Looking at the
World Bank KEI data for 2012 (latest available with an update is
scheduled for this year), we see that the benchmark group has a
median subindex ranking of 15.5, while the GCC 56. In each of the
benchmark economies, 2 out of 4 indices are in the top-10
worldwide. The GCC group lags on economic incentive regime,
innovation (the biggest gap) and education, while the smallest gap
is on ICT. Comparing to the 2008 data, the UAE is almost unchanged
in rankings (42nd but improved in absolute values), Qatar slipped
24 positions (54th and slipped in absolute terms), Singapore is
unchanged (23rd), Norway slipped 5 positions (5th) and Switzerland
slipped 7 positions (10th). Looking at the sub-indices, the UAE
improved in education and ICT, slipping on EIR and innovation.
Qatar improved on EIR and slipped on education, innovation and
ICT.
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KEI ranking chart 2012
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Findings and key priorities The GCC group lags on economic
incentive regime, innovation (the biggest gap) and education, while
the smallest gap is on ICT. The UAE is almost unchanged in rankings
(42nd but improved in absolute values), Qatar slipped 24 positions
(54th and slipped in absolute terms), Singapore is unchanged
(23rd), Norway slipped 5 positions (5th) and Switzerland slipped 7
positions (10th). Sub-indices:the UAE improved in education and
ICT, slipping on EIR and innovation. Qatar improved on EIR and
slipped on education, innovation and ICT. Key
priorities:InnovationEconomic incentive regimeHuman capital As the
example of Singapore shows, progress along multiple paths
simultaneously is needed.15
Priority 1. Innovation must continue to be a priority on the
national agendas
The UAE and Qatars innovation priorities have not been
benchmarked internationally. Set milestones against international
benchmarks and track progress regularly. Entrepreneurs are missing
as a key component of the national innovation system in the UAE
National Innovation Strategy. Support high-impact entrepreneurship
through, for example, government-created venture capital funds
(e.g., Singapores multi-billion Technopreneurship Investment
Fund).High-impact entrepreneurship (in high-tech sectors in
knowledge-intensive industries) has the highest multiplier effects
(Powell & Snellman, 2004; Moretti, 2012).
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Priority 2. The regulatory regime must be improved
A knowledge economy can only exist under genuine market
conditions allowing for success and failure.Institute bankruptcy
laws within dedicated innovation free trade zones to encourage
entrepreneurs and innovators to take risks and fail, if necessary.
The cost of setting up a business in the UAE (the best ranking MENA
country on the ease of doing business) can be substantial. Simplify
the procedures, and reduce costs and time required to start a
business in the GCC in these free trade zones.IP protection is
crucial for inventors as a reward for risk, and yet inventions are
often left unprotected because of cumbersome procedures.Improve the
IP regime across the GCC: while the UAE and Qatar are members of
WIPOs TRIPS, there are no specialist IP courts and a lack of
specialist local advocates. 17
GCC countries spend little on R&D
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Priority 3. Human capital must be attracted, developed and
retained
Recruit star academics from abroad who in turn will bring over
their teams to establish world-class science parks and universities
which are currently missing in the GCC (the exception is KAUST).
Move beyond the teaching-only university model to a research and
teaching university model. Institute smart immigration policies for
example, entrepreneur visas ensuring a temporary or permanent
residency status for qualifying entrepreneurs and scientists (such
as in Singapore, the UK and Canada). Provide favourable conditions
to attract entrepreneurs and encourage gestation with indigenous
innovators. Encourage a favourable attitude towards innovation
starting from primary school by organizing awards, contests and
boot camps.
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Thank you!Questions?
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