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The Frankfurt Book Fair is one of the world’s most important and well visited book fairs. It has emerged as a key forum to define the agenda for the global publishing industry. This year, the United Arab Emirates (UAE) will be a featured market. As a featured market, the UAE will have the opportunity to showcase its growing publishing industry, expand trade links, and attract foreign investment from international publishers and retailers.

In the run up to the event, Tahseen Consulting was asked by the Frankfurt Book Fair organizers to contribute its thoughts on the key challenges facing the UAE publishing industry. For over a decade, Tahseen Consulting has been involved in many of the Arab region’s initiatives to enhance the competitiveness of domestic publishing industries. We have conducted several regional and country level analyses on the challenges facing domestic publishing industries in the Arab World such as our landmark publication on Saudi Arabia’s publishing industry which supported the Saudi Publishers Association’s promotion as a full member of the International Publishers Association.

We are honored to have contributed our thoughts on the key challenges the UAE publishing industry must address to consolidate and build on the significant growth the industry has experienced over the last several years. At Frankfurt Book Fair, Tahseen Consulting’s Chief Executive Officer Walid Aradi will be discussing these challenges as well as potential market opportunities in more depth.

Key Challenges the UAE Publishing Industry Must Address in its Next Growth Phase

Just four decades ago, 48% of Emiratis were illiterate. Today, the illiteracy rate has dropped below 1% due to the United Arab Emirates’ focus on improving access to quality education for all. The United Arab Emirates’ significant educational, social, and economic gains, have produced an increasingly globalized and educated population eager to consume more locally produced and culturally-relevant content, particularly in Arabic. In the last decade, a small, enterprising national publishing industry has sprung up to meet this growing demand.

The United Arab Emirates’ publishing industry is evolving at a transformative time –publishers are faced with the challenge of redefining an industry which has traditionally focused on ink-to-paper content by finding new and innovative ways to merge high-value Arabic content and technology to meet evolving reader demand. Despite the youth of its publishing industry, the United Arab Emirates has the potential to become a global hub for international and regional publishers, distributors, and other complementary creative sectors. The industry is projected to grow at a compound annual growth rate of 12% to 2030. However, additional growth could be achieved if several industry concerns are addressed.

Enhancing export competitiveness of Emirati publishers

In 2014, book exports from the UAE were $40 million versus imports of $126 million based on the most recent customs data available. Over the last decade UAE book exports have grown at a compound annual growth rate of 1%, while imports have grown at a compound annual growth rate of 8%. Book publishing has so far failed to contribute to the diversification of the United Arab Emirates’ exports. These statistics show that the UAE publishing industry remains insular and inward looking primarily due to its youth. The low number of titles produced in the UAE, estimated at approximately 500 titles per year and unique demographic structure, partially explains the imbalance between book import and exports, but the industry faces a range of other significant challenges that reduce export competitiveness.

Though changing due to increased participation in international book fairs, the international publishing community still has little awareness of the emerging UAE publishing industry. A growing portion of UAE titles are of sufficient quality and appeal for global export. For example, Emirati-authored books now make up 11% of the top-selling Arabic books in the UAE, and Kalimat’s children’s book Tongue Twists was recently awarded the Bologna Children’s Book Fair Award. However, international publishers and literary agents still remain largely unaware of UAE published titles. An interesting initiative by Spain, called New Spanish Books, which provides an online guide of titles from Spanish publishers and literary agents available for foreign rights sales, is potentially a program that could be replicated in the UAE to increase awareness of the titles of Emirati publishers with export potential. At the most foundational level, enhancing export competitiveness of publishers will require an industry wide effort that brings together government entities that are concerned with the promotion of cultural industries and economic diversification as well as civil society institutions like the Emirates Publishers Association, and publishers.

At the publisher level, two significant issues must be addressed: enhancing the market responsiveness of domestic publishers to operationally respond to the internationalization and globalization of the publishing industry and building the capacity of domestic publishers to access international markets through translation, selling foreign rights, and international marketing and promotion. While use of Arabic is a common denominator which promotes export to other countries in the Arab World, export statistics show that UAE books also have a broader appeal in countries such as the UK, US, Germany, Spain, and Italy. Though there are several government backed industry support initiatives, such as translation and rights trading grants, more comprehensive publishing industry support programs, potentially similar to the Canada Book Fund, could be more impactful in increasing the export competitiveness of domestic publishers and addressing firm-specific challenges that limit export capacity.

Strengthening the domestic production of learning materials

Approximately 54% of UAE book imports are textbooks primarily from the UK and US. Imported textbooks generally cover science and mathematics subjects while domestically produced textbooks, which are primarily published by the Ministry of Education, cover humanities and religion subjects.

Emerging research on textbooks and their relationship to learning outcomes suggests a link between textbook design features, student reading levels, and student performance – engaging textbook content with practical application to students’ lives influences reading of textbooks which ultimately affects student learning outcomes. In this way, the high portion of imported textbooks and regional textbooks which lag socio-cultural development, combined with other factors like poor quality teaching, may ultimately be having a significantly negative effect on student learning outcomes.

Evidence of this complex linkage is potentially found in the UAE’s performance on the 2011 Progress in International Reading Literacy Study in which the UAE ranked 40th out of 45 countries in terms of average reading achievement at the 4th grade level. Because of the influence that learning and teaching materials have on learning outcomes and reading skills, a key challenge which must be addressed is ensuring that educational materials are appropriate to the local context and do not perpetuate cultural and gender stereotypes which are at odds with evolving national values.

The production of quality, Arabic children’s books and digital content is also essential to complement Arabic teaching with age-appropriate, culturally relevant material to inspire children and help educators teach more effectively. While recent studies have shown that children would prefer to read in Arabic, the lack of genre diversity available in Arabic children’s books and online content forces children to consume English publications and media. For this reason, many children have come to perceive reading in Arabic as difficult and boring.

Many UAE publishers have begun to focus on publishing books and digital content for children, but there still remains a shortage of children’s publications in genres such as fairy tales, fantasy, suspense, action, and science fiction. The lack of engaging Arabic children’s books and online content reinforces the use of English and consumption of English language media in the classroom and at home which serves to further erode Arabic proficiency. More diversity in Arabic children’s books can enrich learning, allow children to build on what they learn at school through self-directed reading, and enable parents to complement the role of teachers by reading to their children and encouraging reading for pleasure.

Enhanced capacity of domestic publishers to compete in the educational publishing market is critically important to ensure that Arabic retains its role as a foundation of national identity and to ensure future generations are capable and proficient at leveraging Arabic as an effective tool. Publishers have a very important role in reversing the deterioration of Arabic skills by developing quality Arabic teaching and learning materials that engage students and support teachers in developing Arabic proficiency.

Building a national culture of reading

Though improving, several studies have found that a national culture of reading for pleasure is still in its early stages. These studies point to a range of issues from household access to books to low involvement of parents in building early childhood reading skills. Beginning in the late-2000s, a number of emirate-level initiatives sprung up to address national reading challenges. While the extent and breadth of these initial efforts to address national reading challenges was ambitious, collaboration and coordination across the many entities and initiatives was lacking. For this reason, the National Reading Law was passed in 2016 to ensure the sustainability of government efforts to build a reading culture and clarify the objectives of government agencies in promoting reading.

The National Reading Law is the foundation for the National Reading Strategy which is backed by $30 million in funding earmarked for 30 national initiatives to support reading and lifelong learning as national values. The National Reading Strategy also deemed 2016 the Year of Reading. The Year of Reading Initiative involves more than 340 major reading initiatives and activities taking place across the country involving over 100 local government entities working in co-ordination with the Higher Supervisory Committees for Year of Reading. The UAE has come a long way in defining a common agenda for promoting a national culture of reading based on localizing promising international best practices.

Best PracticeIndicative UAE Programs
Giving readers choice* Knowledge Without Borders’ Home Libraries Initiative
* Mohammed bin Rashid Al Maktoum Foundation My Family Reads Program
Incentives and awards* Arab Reading Challenge
* Ministry of Culture and Knowledge Development Reading Creative Award
Ensuring an enabling home environment* Ajman Department of Culture and Community Development My Family Reads Initiative
* Fujairah Department of Economic Development‘s Book in Every Home Initiative
Support from schools* Abu Dhabi Reads Campaign
* Knowledge and Human Development Authority’s #10Minutes10Days challenge
Accessible, modern school and public libraries* Knowledge With Borders and Abu Dhabi Tourism and Culture Authority mobile library programs
* Mohammed bin Rashid Library which will be the biggest library in the Arab World
* Ministry of Education’s reading corner, reading club, and Darfa platform

Ensuring that implementation of GCC VAT does not negatively affect the industry

In February 2016, the Gulf Cooperation Council countries agreed to introduce a Value Added Tax (VAT) at a rate of 5% in January 2018. While the education sector will be exempt from VAT, which will presumably be extended to textbooks and educational materials, it remains unclear how trade books and the raw materials for publishing will be treated under the new VAT system.

Currently, the UAE does not impose customs on imported books and printed goods. A key question that must be addressed as e-commerce grows in the UAE and global and regional online marketplaces increase book and digital content sales is how VAT and customs should be imposed on online transactions in the UAE. A still larger question is whether trade book imports and sales should be exempted from VAT altogether. Another issue that warrants discussion are potential customs and VAT exemptions for critical publishing industry inputs such as paper. Despite these large uncertainties facing the publishing industry surrounding VAT, there have been no policy impact studies conducted by the industry. There are several significant questions surrounding the imposition of VAT on the publishing industry and e-commerce transactions that remain unanswered.

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Since being introduced to the Gulf Cooperation Council (GCC) in 2000, demand for energy drinks has surged, particularly amongst youth. There are no firm figures on the total value of the GCC energy drinks market. However, the Council of Saudi Chambers estimates that Saudis spend over $1.5 billion a year on energy drinks. The energy drink market in the United Arab Emirates (UAE) has been valued at approximately $200 million. If demand in Bahrain, Kuwait, Oman, and Qatar is roughly on par with other GCC countries, the total GCC market for energy drinks could be worth as much as $2 billion per year.

Efforts to Regulate Energy Drinks in the GCC

Given surging demand and high rates of youth consumption, some estimates show that 19 to 29 year olds make up 70% of energy drink consumption, GCC countries have collectively, through the GCC Standardization Organization, and individually, though national laws, pursued public policies to regulate energy beverages on public health grounds. While it is common public perception that government impetus to regulate energy drinks stems from high levels of sugar content relative to other beverages, GCC regulator concerns relate more to caffeine levels and the marketing of energy drinks as supplements that enhance athletic performance and increase energy. Regulators and health advocates believe youth and athletes who consume energy drinks are not fully aware of the health risks of excessive caffeine intake.

Within the GCC Standardization Organization (GSO), the Emirates Authority for Standardization and Metrology (ESMA) and the Saudi Standards, Metrology, and Quality Organization (SASO) have exhibited significant influence on energy drink technical standards which have formed the basis for national regulations on energy drinks in other GCC countries. In 2009, the GSO issued non-binding standards for energy drinks which were subsequently revised in 2015. The exhibit shown below shows how the UAE translated the 2009 and 2015 non-binding GSO standards into national level technical regulations to establish product, display, and labeling requirements for energy drinks in the UAE. The UAE’s national technical regulations for energy drinks show an evolving trend of more restrictive formulation, distribution, and labelling requirements.

The UAE’s national technical regulations for energy drinks show an evolving trend of more restrictive formulation, distribution, and labeling requirements.

The UAE’s national technical regulations for energy drinks show an evolving trend of more restrictive formulation, distribution, and labeling requirements.

A number of the recommended standards issued in the 2015 GSO Technical Regulations which were not adopted by the UAE in its national level technical regulations on energy drinks potentially foreshadow more stringent GCC regulation of energy drinks in the future. Some of the proposed standards from the GSO standards for energy drinks which did not make it into national technical regulations in the UAE but which could be adopted by other GCC countries include:

  • Limiting the maximum capacity of each container to 250 ml
  • Prohibiting sale of energy drinks in government restaurants or canteens, educational and health institutions, and public or private sports clubs
  • Prohibiting print, audio, or visual advertising promotions
  • Prohibiting sponsorships of sports, social, or cultural activities and marketing/promoting energy drinks through such activities
  • Prohibiting free product distribution

However, given the pioneering influence of ESMA and SASO on other GCC countries, it is likely energy drink regulation in Bahrain, Kuwait, Oman, and Qatar will likely closely follow energy drink regulations currently being considered in the UAE and Saudi Arabia. Several more restrictive regulations (shown in the exhibit below) currently being considered by the governments of the UAE and Saudi Arabia which would further limit energy drink sales and consumption potentially serve as bellwether of regulations that may be in the pipeline in other GCC and Arab countries.

Several more restrictive regulations currently being considered by the governments of the UAE and Saudi Arabia which would further limit energy drink sales and consumption potentially serve as bellwether of regulations that may be in the pipeline in other GCC and Arab countries.

Several more restrictive regulations currently being considered by the governments of the UAE and Saudi Arabia which would further limit energy drink sales and consumption potentially serve as bellwether of regulations that may be in the pipeline in other GCC and Arab countries.

The Emergence of an Energy Drinks Sin Tax in the GCC

As in other countries in the world, extending “sin taxes’” to certain foods and products is increasingly seen in the GCC as a practical response to improving public health while increasing government revenues. In 2015, the governments of Saudi Arabia and Bahrain submitted a request to the Committee on Financial and Economic Cooperation of the GCC to consider a 100% excise tax on energy drinks. In January 2016, it was announced in the media that an agreement on the proposed energy drink tax is expected to be signed by all GCC member states by the middle of 2016 with final approval and implementation expected by early 2017. The proposed 100% tax on energy drinks would be one of the first sin taxes introduced in the GCC.

However, there is mixed evidence on the effectiveness of sin taxes as a policy instrument to promote improved public health. Empirical studies of the most common excise taxes in other countries, such as taxes on cigarettes and gasoline, usually conclude that they are fully shifted to consumers. It is generally accepted that higher prices lead to lower levels of consumption. Yet, consumers can easily switch to consuming other high caffeine content products if the prices of energy drinks rise across the GCC.

Unfortunately, real world evidence has found sin taxes, such as the one being proposed for energy drinks in the GCC, have only modest effects on consumption and little or no effect on public health. While it remains unclear how the 100% excise tax on energy drinks will ultimately affect consumer prices, a recent study in the US which assessed the efficacy of increases in sales tax rates as high as 12% on soda suggest that even large taxes do not affect consumption or public health outcomes.

An energy drink consumer faced with higher prices might switch to a number of alternative products, such as soda, coffee, tea, or even snack foods, which have equal, and in some cases higher levels, of caffeine than energy drinks. If the intent of the proposed GCC tax on energy drinks is to limit overconsumption of caffeine, it is unlikely to be effective if it is not extended to other foods and drinks with similar levels of caffeine. This is due to substitution effects – consumers faced with higher energy drinks prices will simply consume caffeine from other sources.

For this reason, the energy drink tax may become only a stealth tax that is ineffective in reducing energy drink consumption and limiting caffeine intake. It is certainly possible that the energy drink tax could be raised to the point at which it does work, but this may place undue burden on consumers and ultimately the cost of the tax may exceed any savings realized by the healthcare system.

What is the Alternative?

GCC public health regulators have very few policies which they can pursue in regulating energy drinks and influencing consumer behavior – reducing availability, restricting marketing and promotion, and increasing prices through taxes. GSO standards and national level laws have already targeted availability and promotion. However, evidence from around the world suggests that sin taxes deliver little benefits.

A more effective approach may be to devote sufficient resources to existing fledgling national campaigns that increase awareness amongst GCC youth of the harmful heath consequences of caffeine over consumption rather than introducing a tax that is likely to be ineffective. Awareness efforts can solicit funds from a range of food and beverage companies, not solely target energy drinks companies, since excess consumption can occur by consuming caffeine from any food or beverage source. If the energy drinks tax is taken forth, the proposed tax on soda should be increased to be at least as high, and the inclusion of other high sugar and caffeinated food and beverage products should also be considered for taxation.

To date, no country has effectively used food and drink taxes to influence public health outcomes. As Tahseen Consulting mentioned in our recent article on tackling the regional diabetes epidemic, perhaps a more urgent public health challenge for GCC regulators is to address the sizable budget gap for preventing and treating diabetes. Given the magnitude of the diabetes epidemic in the Arab World, there is pressing need to increase regional spending on national prevention strategies.

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ميريام نجم: كيف تطور دور المرأة الخليجية في مجال ريادة الأعمال في خلال السنوات العشر الماضية؟

وليد العرادي: ساهم التطور الكبير الذي شهدته المرأة منذ عام 2000 على الصعيد التعليمي والاجتماعي في زيادة مشاركة المرأة في الاقتصاد الخليجي مما نمى مهاراتها وزاد من قدرتها على الاستفادة من الفرص المتاحة في السوق المحلي حيث انضم ما يزيد على 1.5 مليون مرأة إلى سوق العمل بين عامي 2001 و 2010. وبينما اقتصرت مشاركة المرأة في الماضي على الوظائف الحكومية وريادة الأعمال المرتبطة بالمشاريع الصغيرة المنبثقة من المنزل، استطاعت المرأة تطويع المهارات المكتسبة من مشاركتها في سوق العمل وتسخير التقنيات المتوفرة مثل الشبكة المعلوماتية لتوسيع نطاق مشاركتها في ريادة الأعمال لتشمل المجالات المرتبطة باقتصاد المعرفة كالتعليم والصحة على سبيل المثال.

وتشير الإحصاءات إلى أن مشاركة المرأة في ريادة الأعمال يزيد من التنويع الاقتصادي ويساهم بشكل إيجابي على الأداء الاقتصادي للدول حيث أن المرأة هي أكثر ميلا لإعادة استثمار دخلها في المشاريع التي تفيد المجتمع بشكل عام والأطفال بشكل خاص. وأدركت الحكومات ومؤسسات المجتمع المدني النفع العام المنبثق عن زيادة نسبة النساء في ريادة الأعمال حيث ظهرت في الآونة الأخيرة عدة مبادرات وبرامج لتمكين رائدات الأعمال وتفعيل دورهن في القطاع الخاص والمساهمة في استدامة أعمالهن كبرنامج صوغة التابع لصندوق خليفة لتطوير المشاريع في الإمارات ومركز روضة لريادة الأعمال والابتكار في قطر وبرنامج سند في عمان بالإضافة إلى مجالس سيدات الأعمال في عدة مدن خليجية. وسعت هذه المبادرات لتقديم الاستشارات وخدمات الاحتضان في حاضنات الأعمال وتنظيم المؤتمرات والندوات لنشر الوعي حول ريادة الأعمال مما سيساهم في رفع عدد رائدات الأعمال في المستقبل.

ميريام نجم: هل من عوائق اقتصادية تقف في وجه تطوّر دور سيدات الأعمال الخليجيات؟

وليد العرادي: على الرغم من التطور الذي شهدته المرأة في الخليج في مجال ريادة الأعمال إلا أنها ما زالت تواجه عدة تحديات مثلها مثل الرجل. ولكن توجد هناك عقبات اقتصادية واجتماعية خاصة بالمرأة. فعلى سبيل المثال يصعب على المرأة الحصول على تمويل مصرفي في قطر بدون الحصول على ضمانات مالية من أحد أقاربها. وتشير دراسة أعدت مؤخرا في السعودية أن 82% من النساء يعتمدن على مدخراتهن الشخصية لتمويل الأعمال نظرا لصعوبة استقطاب رأس المال عبر شركات الاستثمار في الملكية الخاصة أو البنوك الاستثمارية. كما تشير الدراسة إلى الصعوبات التي تواجهها المرأة في تعاملاتها التجارية بدون الاعتماد على الأقارب من الذكور لأسباب اجتماعية. وفي الإمارات العربية المتحدة أظهرت الاستطلاعات أن غالبية رائدات الأعمال اللواتي قمن بإغلاق شركاتهن قمن بذلك لأسباب عائلية. ويشير ذلك إلى وجود بعض الضغوطات الاجتماعية على المرأة ما يمنعها في بعض الأحيان من الانخراط في مجال ريادة الأعمال.

ميريام نجم: ما هي نسبة السيدات في مجال ملكية المشروعات الصغيرة والمتوسطة في الإمارات وقطر؟

وليد العرادي: تمتلك النساء 13% من إجمالي الشركات الخاصة في العالم العربي. وتعد هذه النسبة منخفضة مقارنة بالمعدلات المسجلة في أنحاء أخرى من العالم مثل أوروبا وآسيا الوسطى والتي تصل نسبة امتلاك النساء للشركات الخاصة فيها إلى ضعف المعدلات المسجلة في العالم العربي. وقد لا تمثل هذه المعدلات النسب الحقيقية لانخراط المرأة بريادة الأعمال نظرا لاختلاف سبل جمع المعلومات من دولة لأخرى وصعوبة التقاط المعلومات المتعلقة بالمشروعات التي تبدأ من المنزل.

أما بالنسبة لدول مجلس التعاون وبالأخص دولتي قطر والإمارات العربية المتحدة، تشير إحصاءات غرفة تجارة قطر إلى أن 17% من رواد الأعمال في قطر هم من النساء بينما لا تتجاوز نسبة ريادة الأعمال بين النساء 8% في الإمارات حسب إحصاءات المرصد العالمي لريادة الأعمال. والجدير بالذكر أن نسبة ريادة الأعمال بين النساء تنخفض في الإمارات من 8% للمشاريع في مراحلها المبكرة إلى 0.9% للمشاريع القائمة بينما تنخفض هذه النسبة بين الرجال بنسبة أقل (من 12% إلى 7%) ما يشير إلى تدني فرص النجاح بين النساء في ريادة الأعمال. ولا يدل ذلك على تدني قدرة المرأة في إنشاء وإدارة الشركات وإنما يدل على كبر حجم التحديات التي تواجهها وقلة البرامج التي تعنى بمساعدتها على مواجهة تلك التحديات.

ميريام نجم: ما هي المجالات التي تلمع فيها رائدات الأعمال بشكل ملفت وهل ترى طفرة من الشركات الصغيرة في تلك المجالات؟

وليد العرادي: اقتصرت مشاركة رائدات الأعمال في الماضي على المشاريع الصغيرة المنبثقة من المنزل. وركزت تلك المشاريع على الحرفيات والصناعات التقليدية والطبخ. ولكننا لاحظنا في السنوات العشر الأخيرة زيادة ملموسة في المشاريع التي تطلقها النساء في قطاعات التعليم والصحة والثقافة والتجزئة والقطاع الخدمي بشتى مجالاته والريادة الاجتماعية. وتشير دراسة أعدتها مؤخرا منظمة التعاون والتنمية الاقتصادية على أن أنشطة الشركات التي ترأسها رائدات الأعمال تركز بالدرجة الأولى على خدمة الأشخاص بدلا من الكيانات التجارية.

ولا تزال رائدة الأعمال غائبة نوعا ما عن بعض المجالات كالعلوم والتكنولوجيا والهندسة والرياضيات التي تعرف ب STEM وهي ظاهرة ليست بغريبة حيث أن المرأة تمثل نسبة ضئيلة من الطلاب الجامعيين في هذه المجالات وكثير من النساء لا يسعين بالضرورة إلى العمل في المجالات ذات الصلة بعد التخرج.

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The World Government Summit hosted annually in Dubai is emerging as a key forum to define the agenda for the next generation of governments. Tahseen Consulting is honored to have contributed its thoughts on how Arab governments can innovate to solve some of the most significant challenges facing the region.

In the following interview, Tahseen Consulting’s Chief operating Officer, Wes Schwalje, spoke with representatives from the World Government Summit regarding his thoughts on how the Arab governments are tackling the regional diabetes epidemic.

World Government Summit: What are the prevention strategies for diabetes in the Middle East?

Schwalje: According to the International Diabetes Federation, more than 400 million adults have diabetes worldwide, and 642 million adults will have diabetes by 2040. In the Middle East, diabetes is the leading health care challenge facing the region. With 1 in 10 adults living with diabetes, the Middle East has the highest diabetes prevalence globally. Today, over 36 million adults in the region are living with diabetes. By 2040, the number of adults with diabetes is expected to increase to over 72 million adults, which some experts estimate will represent a quarter of the Middle East’s population. Six countries in the Middle East, Bahrain, Egypt, Kuwait, Oman, Saudi Arabia and the United Arab Emirates, have amongst the world’s ten highest prevalence rates for both diabetes and impaired glucose tolerance, which often leads to diabetes.

Many of the diabetes sufferers in the region have not been diagnosed and are at higher risk of developing harmful and costly complications. Without intervention, diabetes has the potential to lead to significant socio-economic challenges that will affect individuals, families, businesses, and society as a whole. Several of countries in the Middle East have established comprehensive national diabetes awareness, prevention, and control programs. These strategies involve multi-stakeholder collaboration between public health agencies, social sector organizations, and the private sector to promote public education about diabetes and its risk factors, early detection through screening, prevention of onset through lifestyle modification, and support for disease management to avoid future complications.

World Government Summit: Are they being implemented efficiently? Are they working?

Schwalje: Although 9% of the world’s diabetes sufferers live in the Middle East, regional governments spend only 2.5% of the world’s healthcare diabetes budget. In 2015 the Middle East spent $17 billion on treating diabetes, which is approximately 15% of the total health care budget in the region. Regional spending on diabetes treatment is expected to surge to $31 billion by 2040. However, regional spending on treating diabetes is far less than in other countries. A key risk if budgets for diabetes treatment are not increased will be the inability to adequately treat all people with the disease. There is evidence in some countries that national prevention strategies are working For example, diabetes prevalence rates in the United Arab Emirates declined by 5.5% from 2003 to 2015. From 2003 to 2015, 7 of the 22 countries in the Arab World reduced their diabetes prevalence. The other remaining Arab countries saw increases in diabetes prevalence rates. For example, diabetes prevalence rates in Egypt, Lebanon, Libya, and Djibouti increased by 5% from 2003 to 2015. In terms of preventing diabetes in the region, national prevention strategies have a mixed track record of success. However, the case of the UAE is a notable exception which might represent a good practice for other Arab countries to follow.

CountryPrevalence 2015Prevalence 2003Change
Algeria6.84.12.7
Bahrain15.614.90.7
Egypt14.99.85.1
Iraq7.27.7-0.5
Jordan9.172.1
Kuwait14.312.81.5
Lebanon12.26.45.8
Libya9.23.75.5
Morocco7.74.23.5
Oman9.97.42.5
Qatar13.58.55
Saudi Arabia17.6161.6
State of Palestine6.59.4-2.9
Sudan7.73.14.6
Syrian Arab Republic76.20.8
Tunisia9.54.64.9
United Arab Emirates14.620.1-5.5
Yemen3.87.7-3.9
Comoros7.57.7-0.2
Mauritania22.3-0.3
Djibouti7.42.15.3
Somalia4.47.3-2.9
Source: International Diabetes Federation Diabetes Atlas

World Government Summit: What level of intervention do we need?

Schwalje: There are some success stories of national diabetes prevention strategies from the region. However, as evidenced by comparatively low levels of spending on diabetes treatment relative to other regions, more can be done. This will involve implementing the following measures:

  • Increasing awareness of the key lifestyle risks, such as sedentary lifestyle, poor nutrition, and lack of physical exercise, which can lead to diabetes
  • Enhanced programs that enable early diagnosis of diabetes cases so that individuals can be treated quickly as soon as it is detected to avoid complications and costly burdens on national healthcare systems
  • More information and education for people with diabetes on how to manage the condition effectively and increase treatment compliance
  • More community support for people with diabetes
  • Enhanced physician training to help medical professionals with diagnosis and providing effective treatment

World Government Summit: What are the biggest barriers to diabetes prevention?

Schwalje: A recent survey on the delivery of diabetes care in the Middle East showed that the most important barriers to optimal diabetes care remain unhealthy lifestyles, lack of education about risk factors, and poor diet. These findings point towards the need for Arab countries to enhance awareness and prevention programs that promote healthy eating and physical exercise as well as awareness of risk factors.

World Government Summit: What are the consequences of not stemming the diabetes tide?

Schwalje: Diabetes caused 342,000 deaths in 2015, and over half of those deaths were in people under the age of 60. The cost of specialized medical services for treating diabetes in Arab countries is leading to a significant increase in the portion of government healthcare budgets required for treatment. Diabetes is a chronic condition that can lead to serious complications if not detected and treated. The high level of undiagnosed and poorly controlled cases of diabetes in the region further increases the costs associated with treating diabetes in the region. Throughout the region, the struggle with diabetes has significant economic costs that, if gone unchecked, can have implications on the quality of other government services by claiming vital funds that would have been used for other social services spending. Diabetes also has a tremendous emotional impact upon families who lose loved ones too early. The economic and social impacts of early mortality, which have not been systematically assessed in the region, should not be underestimated.

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The World Government Summit hosted annually in Dubai is emerging as a key forum to define the agenda for the next generation of governments. Tahseen Consulting is honored to have contributed its thoughts on how Arab governments can innovate to solve some of the most significant challenges facing the region.

In the following interview, Tahseen Consulting’s Chief operating Officer, Wes Schwalje, spoke with representatives from the World Government Summit regarding his thoughts on building entrepreneurial ecosystems in the UAE and Arab World.

World Government Summit: Why is entrepreneurship important for the UAE?

Schwalje: The UAE Vision 2021 establishes entrepreneurship as a vital enabler of the UAE’s transition to a knowledge-based, highly productive, and competitive economy. For this reason, entrepreneurship ecosystem development at the national and Emirate levels has been prioritized as a key economic development policy priority. The UAE views a vibrant entrepreneurship ecosystem as essential in order for startups and small and medium-sized enterprises (SMEs) to grow, thrive, and commercialize innovative ideas. To assist SMEs, UAE policymakers have primarily focused on cultivating a healthy risk-taking culture, easing access to finance, implementing better regulation, and enabling SMEs to reach international markets. As in other countries, the UAE is targeting small firms due to their potential to create jobs and grow into profitable companies that can serve as engines for employment and economic development. The UAE Ministry of Economy recently estimated that SMEs contribute more than 60% of the UAE’s GDP and provide 86% of all private sector employment. The immediate goal of the UAE’s entrepreneurship development policies is to establish assistance programs that support fledgling ventures in the early, vulnerable stages of their development so that they are able to grow and become engines that sustain growth for long-term development. Over the longer term, nurturing and supporting entrepreneurs is important to the UAE for creating jobs, encouraging nationals to join the private sector, economic diversification, boosting innovation, increasing productivity, and commercializing research.

World Government Summit: How can the government help to create a new generation of entrepreneurs?

Schwalje: Many entrepreneurs in the UAE still struggle with starting and growing their businesses because significant resources have been devoted to limited, singular interventions at either the national or Emirate levels rather than devoted to system wide change. Though it has expanded rapidly, the UAE entrepreneurial ecosystem, which includes upwards of 330 different public and private stakeholders, currently lacks critical institutions and cooperative platforms which could make it more effective. Some Emirates have been much more effective at developing vibrant entrepreneurship ecosystems than others. While there is no one-size-fits-all model for building a competitive entrepreneurship ecosystem, more work must be done to catalyze an inclusive dialogue where policymakers, entrepreneurs, and other stakeholders come together to discuss barriers and find solutions at the national and Emirate levels.

Institutions tasked with implementing entrepreneurship development policies must work in closer coordination to build a conducive culture for entrepreneurial risk taking, enhance access to new venture finance, ensure venture-friendly markets for products, and improve institutional and infrastructural support for entrepreneurs. While some progress has been made, entrepreneurship policies must also be more closely aligned with national technical and vocational education and training policies. This will require integrating entrepreneurship more effectively into the education system from an early age. There is also an urgent need for career guidance to accommodate entrepreneurship so that it might be possible for students to differentiate between choices after secondary schooling like starting a business, joining the armed forces, seeking a job immediately, attending a technical program, or continuing their studies at the higher education level. Based on the scarcity of initiatives which specifically target aspiring female entrepreneurs, more entrepreneurship education and training for women is needed in the GCC. While most GCC nations have supported entrepreneurship centers to improve the environment for entrepreneurship including providing funding and training, reducing bureaucracy, and establishing business incubators, very few of these centers specifically cater to women’s needs.

World Government Summit: Which other stakeholders can get involved too?

Schwalje: Policy frameworks and institutions play a particularly important role in entrepreneurship ecosystem development. Some Emirates have made significant progress in developing institutionally rich entrepreneurship ecosystems while other Emirates offer much less support for entrepreneurs. A key risk in designing national and Emirate level entrepreneurship development policies is proceeding without systematic input from entrepreneurs and other stakeholders. While identifying the particular needs of entrepreneurs in each Emirate is essential, international experience offers prescriptive guidance for developing entrepreneurial ecosystems and the key institutions and stakeholders that should be involved.

Policy makers must ensure the regulatory framework supports entrepreneurs. Public and private sector stakeholders must work to ensure the presence of early customers and, once fledgling business begin to grow, they can reach regional and global markets. Access to a full spectrum of financial services is critical to entrepreneurial success. This include the presence of financial institutions which provide SME finance, venture capital funds, corporate venture capital funds, government grants and loan programs, and angels and angel groups. A vast array of support organizations ranging from incubators and accelerators to competitions to export assistance centers is required for a competitive entrepreneurial ecosystem. These institutions must work together to help entrepreneurs turn an idea into a business, launch, and then grow by providing training, mentorship, networking, expert guidance, and inspiration. The private sector is important due to philanthropic giving and corporate social responsibility programs support entrepreneurship, identifying opportunities in their supply chains that can present opportunities for entrepreneurs, commercializing academic research, and in opening up exit opportunities for entrepreneurs. The institutions that govern the education and training system must work to ensure emerging skills needs are met and provide quality, entrepreneurial training. Finally, the media is important to ensure entrepreneurial successes are highlighted to inspire the next generation of entrepreneurs.

World Government Summit: Is there a need for different approaches in other Arab countries?

Schwalje: In many Arab countries, economic integration, the need for economic diversification, occupational preferences for public sector employment, and high youth unemployment rates have prompted the adoption of economic reforms to improve the enabling environment for entrepreneurship. However, understanding the determinants of self-employment and how they might differ across the region is critical if entrepreneurship is to be a solution for the region’s youth unemployment challenge and can ultimately lead to desired economic outcomes. Differing determinants of entrepreneurship across the region have significant implications for national policies and support programs that might be offered to regional entrepreneurs. The distinction between necessity and opportunity entrepreneurship is becoming increasingly relevant as countries in the region are largely pursuing undifferentiated entrepreneurship policies that are primarily aimed at opportunity entrepreneurs.

World Government Summit: How are the needs of entrepreneurs different across the Arab region?

Schwalje: An emerging body of international empirical literature suggests that necessity and opportunity entrepreneurs differ significantly in socio-economic characteristics; motivation and the types of opportunities pursued; and the potential for their entrepreneurial endeavors to create jobs and motivate private investment.

Category of Comparison Opportunity EntrepreneursNecessity Entrepreneurs
AgeOn average approximately 5 years younger according to empirical studies based on international dataUp to 5 years older than opportunity entrepreneurs in empirical studies based on international data
EducationTend to be more highly educated with education and general labor market experience having a positive impact on earnings and reducing exit ratesTend to be less educated and benefit more from specific vocationally oriented education found to be related positively to earnings
Industry ExperienceMore likely to have working experience from regular employment in the same industry they are enteringLess likely to have experience from regular employment in their focus industry
MotivationVoluntarily attracted into self-employment by the identification of opportunities; They often leave wage employment or pursue opportunities alongside full time employmentOften driven into self-employment after involuntary job loss or scarcity of employment opportunities
CyclicalityMore likely to create ventures when economic conditions are good and unemployment is low; They also choose to create businesses regardless of their employment statusNegative economic shocks that are more likely to affect small firms or increase unemployment push individuals to create businesses
Quality of Opportunities PursuedCreate larger businesses in knowledge-based industries which require significant amounts of invested capital and employees generate higher earningsLess likely to have business ideas with significant growth prospects and more likely to exploit entrepreneurial opportunities in low-income, low knowledge-content sectors
Potential for Job CreationHigher probability of creating additional jobs Job creation, Investment, and Survival
Primarily focused on employing themselves and have lower probability of creating additional jobs
Firm Survival Higher survival and lower failure and closure ratesFace a higher risk of failure, or, if they survive, they may produce only marginal businesses,
invest insignificant amounts of capital, fail to create further jobs, and earn minimal incomes
Capital Investment and Risk ToleranceInvest higher amounts of capital into their venture and are more risk tolerantLower amounts of invested capital and lower tolerance for risk
Tendency to Seek External SupportMore likely to have built their network to include people valuable in the process of venture creation such as potential customers, cofounders or financiersLess likely to seek support in the form of professional or personal assistance during venture creation

These findings present strong evidence that national training and support programs for entrepreneurship require significant tailoring to meet the needs of both necessity and opportunity-driven entrepreneurs. By not accounting for particular needs of different types of entrepreneurs, some national entrepreneurship policies in the region are designed around a one size fits all approach which is particularly lacking in regards to serving necessity-driven entrepreneurs.

International evidence suggests a strong case for more tailored national entrepreneurship policies in the Arab region which reflect the mix of necessity versus opportunity-driven entrepreneurs operating in particular countries. Entrepreneurship in countries at a high opportunity entrepreneurship equilibrium, which includes all of the Gulf countries, is presumably much different entrepreneurship in countries like Egypt, Palestine, and Yemen in a low opportunity entrepreneurship equilibrium. Necessity and opportunity entrepreneurs differ in socio-economic characteristics; motivation and the types of opportunities pursued; and the potential for their entrepreneurial endeavors to create jobs and motivate private investment. These differences are potentially unexploited policy levers which might serve as guidance for more targeted national entrepreneurship policies. Instead of classifying all entrepreneurs as a homogeneous group driven by opportunity and offering undifferentiated support, regional governments can introduce targeted training programs and support, contingent financing, and subsidies which might better serve both necessity and opportunity entrepreneurs. If entrepreneurship is to continue to be championed as a panacea for the region’s youth unemployment challenge and resolving structural economic and labor market issues, then such tailored policy measures appear long overdue. The table below presents a summary of potential components of regional entrepreneurship policy which may need to be reconsidered to more effectively meet the needs of both opportunity and necessity entrepreneurs.

Components of Entrepreneurship PolicyTypical Opportunity Entrepreneur Approach in the Arab RegionWhat Might be Needed to More Effectively Reach Necessity Entrepreneurs in the Arab Region
Entrepreneurship Policy ApproachPolicies view entrepreneurs as a segment of the national economy who can take advantage of all programs and may not distinguish between small business support and policies which support entrepreneurial venturesDefined policies and programs to meet the specific needs of necessity entrepreneurs and other country specific challenges
Entrepreneurship EducationEarly and post-secondary entrepreneurship education and business skills training at university and non-university based business incubatorsSupport for training in specific technical and vocational areas potentially below the post-secondary level in addition to early and post-secondary entrepreneurship education and business skills training
Access to FinanceIncreasing the supply of capital through direct loans and venture fundsPublic financing programs that may target a broader range of industries along with a stronger focus on helping entrepreneurs access capital by focusing more on business issues such as management skills and evidence of a solid business plan
Optimizing the Regulatory EnvironmentMacroeconomic approach to tax and regulatory policy focused on changes in laws (e.g., general tax reductions) and regulations that affect everyone doing business Policy impact analysis to determine if regulatory changes are sufficiently focused on the needs of necessity entrepreneurs; Policies that most benefit these businesses are those that defer expenses, allow companies to convert tax incentives into cash, and lower development costs
Technology Exchange and InnovationCluster development and leveraging public funds that encourage university-private sector collaborationBenchmarking and evaluating the benefits associated with state investments on necessity entrepreneurs and whether they are adequately served by such initiatives
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When it comes to news on socio-economic trends in the Arab World, government and business leaders turn to Trends Magazine. Tahseen Consulting is honored to have its insights on regulating the emergent sharing economy in the Arab World in the publication’s October issue. We have posted the full article below.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with Nikhil Inamdar, a leading voice on key business trends in the region, regarding the evolving role the sharing economy is playing in meeting the region’s youth employment challenge. In a wide-ranging discussion, Schwalje warns of avoiding heavy-handed regulatory approaches that might limit the socio-economic impact pioneering companies in the sharing economy such as Uber and Airbnb can have on the Arab region.

Despite the negative press attention the sharing economy has received, the Arab World has largely shied away from public and government debate over the policy issues that this major growth sector highlights as it disrupts mature industries. As the sharing economy has grown, it has puzzled global policy makers who are faced with the challenge of embracing innovative, digital services which can lower costs and increase convenience for consumers while balancing the continued competitiveness of incumbent industries.

The Rapid Growth of the Sharing Economy in the Arab World

The sharing economy includes a wide range of online platforms that help people share access to assets, resources, time, and skills. While there are a growing number of regional companies that have entered the sector, the dominant players in the Arab World remain well-funded, Silicon Valley-based startups. From Marrakech to Beirut, and many cities in between, sharing economy firms have rapidly scaled their operations across the Arab World due to strong consumer demand. However, regional policymakers, for the most part, have yet to consider how to regulate the sharing economy.

The Importance of Travel and Tourism to Regional Economies and Employment
CountryTravel and Tourism Total Contribution to GDPTravel and Tourism Total Contribution to Employment
UAE8.40%9.20%
KSA7.70%11.10%
Egypt12.80%11.60%
Morocco17.90%16.00%
Lebanon21.10%20.30%
Source: World Travel and Tourism Council

Early Attempts At Regulation

In considering how to regulate the shared economy, Arab policy makers face two options: dismiss new sharing economy platforms by regulating them out of existence and retaining legislation that favors market incumbents or embrace the efficiencies the sharing economy  can bring to increase innovation and harness the growth of the shared economy to promote socio-economic growth.

Dubai is ground zero for how regulation of the sharing economy might unfold across the region. For example, in the run up to Expo 2020, Dubai is attempting to broaden its range of accommodations. One market segment that has surged in the past several years is short-term apartment rentals. Until 2013, when Decree Number 41 was introduced, short-term rentals of holiday homes were largely unregulated. The Decree made it mandatory for operators and owners who lease out their apartments on a short-term basis to attain a license from the Dubai Department of Tourism and Commerce Marketing. (DTCM) In mid-2014, DTCM started accepting license applications from operators and owners. As of July 2015, a total of 37 operators and owners were licensed to rent out holiday homes in Dubai with 800 units registered.

It is unclear how Dubai’s renewed push to register holiday homes and impose fines on offenders who rent their properties without a license will ultimately affect sharing economy players operating in the short term rental sector. The licensing of holiday homes in Dubai is an example of a reactionary public policy response that could potentially erode the supply base of shared economy players in the short term rental sector by imposing a licensing process on landlords. A win-win solution which would have supported the growth of the shared economy as well as maximized government revenues would have potentially been to meet with sharing economy companies and short term rental agents to discuss how the Dubai tourism tax could be collected from intermediaries and paid directly to authorities. In France, Amsterdam, India, and the United States, sharing economy companies work with authorities to do exactly this.

A recent study suggests that the market presence of sharing economy players operating in the short term rental sector negatively impacts hotel room revenues. However, the competitive response from incumbent hotels often results in price reductions by lower-end hotels and hotels not catering to business travelers. In this respect, short term rental sharing economy firms have the potential to lead to lower consumer prices for hotel rooms as well as more flexible accommodation offerings. In so far as, lower accommodation prices can drive tourism numbers even higher, Dubai’s introduction of licensing requirements as a mechanism for regulating the sharing economy may ultimately have the unintended effect of reducing tourism by reinforcing higher accommodation prices.

Across the Arab World, overlaps between regulatory and operational functions of government institutions can result in significant inefficiency. When government entities provide a service, set delivery standards, and monitor compliance with standards, an unintended outcome is often reduced quality of public service delivery and lower service standards. This governance tradition in the Arab World has produced a number of cases in which regulatory agencies, which should be accountable to Ministries and focused on setting standards to ensure high quality public services, have become too involved in commercially motivated, operational functions. Over involvement of government institutions in operational activities has the potential to reduce the growth of the sharing economy and ultimately negatively impact consumer convenience and choice.

In association with the United Arab Emirates’ Smart Government Initiative, government agencies have been called upon to make their services accessible via smart technologies such as smart phones. The Dubai Road and Transport Authority’s (RTA) recent announcement of its e-limo system, which will require private hire vehicle operators to route transactions through its booking and dispatch system, is a potential example of a case where a government entity with a regulatory and policymaking mandate is extending itself too far into an operational role. By introducing their own limo application, which essentially competes with sharing economy transport networking companies and erodes market supply, RTA risks crowding out private sector innovation that can fuel entrepreneurship, private investment, and job creation.

Embracing the Sharing Economy for Regional Socio-economic Development

According to the World Travel and Tourism Council, travel and tourism contributes approximately $283 billion to Arab economies and employs 11 million people. This means that the contribution of the travel and tourism sector to regional gross domestic product is on par with the banking, chemicals, agriculture, and automotive sectors. It is clear that travel and tourism will play a strong role in generating economic growth and employment in the Arab World over the next decade.

The sharing economy, in so far as it is a key driver of travel and tourism, has the potential to contribute significantly to regional socio-economic development. While there have been no rigorous attempts to determine the socio-economic impact of the shared economy in the Arab World, limited data suggest that the sharing economy has a growing importance in driving the travel and tourism sector in the region. For example, 40% of Uber’s riders in Dubai come from outside the country. Statistics such as this indicate that sharing economy trends and penetration rates globally can have a significant impact on economies regionally.

A recent report on the sharing economy workforce in the United States found that 67.5% of sharing economy jobs are occupied by workers in the 18-34 age demographic. The youth employment impact of the sharing economy globally suggests that embracing the sharing economy in the Arab World could play a key role in government socio-economic development programs to address the Arab World’s youth unemployment challenge. This insight has important implications for how Arab governments should approach regulating the shared economy.

The Age of US Sharing Economy Workers
Age% Sharing Economy Workforce
18 - 2438.70%
25 - 3428.80%
35 - 4416.30%
45 - 5411.00%
55 - 644.30%
65 +0.90%
Source: Requests for Startups 2015 1099 Economy Workforce Report

The Future of the Sharing Economy in the Arab World

The future of the sharing economy in the Arab World is heavily dependent on how governments approach sector regulation. Knee jerk approaches to public policy will prevent the likely considerable positive socio-economic development impacts that can be generated by the sharing economy. In the GCC countries, entrepreneurship programs and wage subsidies offer significant potential to attract nationals and private investment to emerging sharing economy sectors that can reduce public sector employment. While in middle income Arab countries, the sharing economy can offer employment options for youth that can be combined with government finance and training programs that eventually lead to business ownership. Where other countries are limiting consumer choice by over-regulation of the shared economy, the Arab World has the opportunity to distinguish itself as a region that embraces the sharing economy through a well-considered public policy response that harnesses the sector’s potential growth for regional socio-economic development.

Unemployment By Age Group in Selected Arab Countries
AgeUAEKSAEgyptMoroccoLebanon
18-2433%52%63%42%45%
25-3432%45%36%40%32%
35-4415%3%1%12%8%
45-5412%0.50%0.06%5%8%
55-648%0.09%NA0.22%4%
65 +NANANA0.22%2%
Source: Latest available statistics from the International Labor Organization
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When it comes to news on economic trends and policies in the UAE, government and business leaders turn to the Abu Dhabi Council for Economic Development’s Economic Review. Tahseen Consulting is honored to contribute its analysis on the economic policy role of the Abu Dhabi Investment Authority to the publication’s November issue. We have posted the full article below.

In the article, Tahseen Consulting’s Chief Executive Officer, Walid Aradi, spoke with representatives from the Abu Dhabi Council for Economic Development regarding his thoughts on the Abu Dhabi Investment Authority’s role in fiscal policy.

Abu Dhabi Council for Economic Development: Who Does the Abu Dhabi Investment Authority Serve?

Aradi: Based on the constitution of the United Arab Emirates, natural resources are the public property of the Emirate in which they are located. The Abu Dhabi Investment Authority (ADIA) receives funds from the Government of Abu Dhabi and invests these funds in the public interest of the Emirate and its citizens. The process for allocating and transferring revenues to ADIA is not rule based but is based on three sources:

  • Budget surpluses, which arise from an excess of petroleum revenues, from the Government of the Emirate of Abu Dhabi. This includes taxes on oil companies as well as profits from the Abu Dhabi National Oil Company (ADNOC)
  • Investment income from returns made by ADIA
  • ADNOC pays an undisclosed percentage of its income directly into two natural resource funds (Abu Dhabi Investment Council and the Abu Dhabi Investment Authority)

The size of the funds under the management of ADIA has been conservatively estimated at between $700 billion and $800 billion.

Abu Dhabi Council for Economic Development: How is it Managed?

 Aradi: ADIA is an independent government investment institution wholly owned by the Abu Dhabi Government. However, it carries out its investment mandate independently of the Abu Dhabi Government and other institutions that also invest funds on behalf of the government. Since 2008, ADIA has made significant progress in transparency and disclosure and has participated in the formulation of the Santiago Principles and meetings of the International Forum of Sovereign Wealth Funds. Key stakeholders in the management of ADIA include:

  • Government of Abu Dhabi: The Government of Abu Dhabi established the legal mechanism for ADIA in 1976 and remains the legal owner of ADIA and its assets.
  • Board of Directors: Provides oversight over ADIA’s management. The Board’s nine members are appointed for three-year periods which are renewable. H.H. Sheikh Khalifa bin Zayed Al Nahyan serves as the Chairman of the Board.
  • Managing Director: Is responsible for investment and operational decisions and reports to the Board of Directors. The Managing Director is also a member of the Board of Directors.
  • Investment Committee: Advises the Managing Director on investment policy and external manager selection and performance.
  • Internal Audit Department: Reports to the Managing Director and the Board of Director’s Audit Committee.
  • Audit Committee: Oversees and appoints two external auditors

Abu Dhabi Council for Economic Development: How is it important for the development and future of Abu Dhabi?

Aradi: ADIA plays a critical economic policy role in efficiently and effectively managing the financial wealth of the Government of Abu Dhabi. Since 1976, Abu Dhabi has maintained a prudent fiscal policy in which oil revenues were used to balance the Emirate’s budget and finance development. Surpluses are invested through ADIA and are drawn upon in times of deficit.

ADIA operates as an inter-generational savings fund with a diversified portfolio of international assets and a focus on generating long-term financial returns. Savings funds are typically utilized by countries to preserve some part of the revenues from a depleting resource for future generations and spending need. In countries that have a high degree of fiscal dependence on the export of nonrenewable resources, a key challenge is to transform nonrenewable resources into sustainable and stable sources of future income while also isolating the country from volatility in commodity prices. Placing commodity revenue in a sovereign wealth fund such as ADIA is a means to avoid boom and bust cycles, such as those we are potentially experiencing now, by accumulating adequate international assets.

ADIA is an important fiscal revenue source that allows Abu Dhabi to reduce its reliance on volatility in oil revenues. Its purpose is it to decouple Abu Dhabi Government finances from oil revenues and to maximize future spending power and to prepare the economy for a post-commodity era.

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When it comes to news on economic trends and policies in the UAE, government and business leaders turn to the Abu Dhabi Council for Economic Development’s Economic Review. Tahseen Consulting is honored to have its work on developing a knowledge economy in the UAE highlighted in the publication’s November issue. We have posted the full article below.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with representatives from the Abu Dhabi Council for Economic Development regarding his thoughts on how Abu Dhabi can build a knowledge economy. In a wide-ranging discussion, Schwalje discusses the link between the UAE’s knowledge-based economic development strategy and high skill, high wage job creation.

Abu Dhabi Council for Economic Development: How Can Abu Dhabi Build a Knowledge Economy?

Schwalje: The development goal of transitioning to knowledge-based economies emerged in many countries in the Arab World in the late Nineties due to the commonality of several factors related to culture, the economic environment, and socio-political developments. Across the region, knowledge-based economic development has become closely intertwined with national competitiveness and economic policies that support innovation, technology development, entrepreneurship, workforce skills development, adoption of high performance organizational structures, and information and communications technology infrastructure development. It has also become associated with environmental sustainability, identity, language, gender equality, and political participation and democratic reform in some countries. Five common economic development justifications, job creation, economic integration, economic diversification, environmental sustainability, and social development, are often cited as the underlying rational for pursuing knowledge-based economic development strategies. Research conducted by Tahseen Consulting shows that seventeen of the twenty-two countries in the Arab World have the development of a knowledge-based economy specifically stated as a medium to long-term development policy objective.

Abu Dhabi Council for Economic Development: How Can Knowledge-based Economic Development Strategies Lead to High Skill, High Wage Job Creation?

Schwalje: The causal relationship between knowledge-based economic development and ensuing job creation which will create the need for increased supplies of high skill workers has been particularly appealing to GCC policymakers. For Arab governments, the heavy reliance of the concept of knowledge-based economy on human capital development provides a useful means to achieve a number of attributed social and economic objectives, such as higher levels of educational attainment ; increased health; efficiency of consumer choices; higher levels of savings and charitable giving; social cohesion; increased self-reliance and economic independence; reduced crime; growth and competitiveness; increased productivity; domestic innovation.

However, with the emergence of low wage, high skills workers in developing countries, knowledge is becoming commoditized. With increasing cost competition in knowledge-based industries from emerging countries, the less resource wealthy Arab countries could feasibly follow a development trajectory grounded in selective participation in knowledge-based and manufacturing industries in which they have a cost advantage and have or can develop quickly sufficient workforce skills to compete against emerging country rivals. The Gulf countries, which employ many of their citizens in high wage roles in parastatals operating in knowledge-based industries and government institutions, may be particularly threatened by competition from low wage knowledge workers and be subject to significant margin compression which challenges the economics of their entry into knowledge-based industries.

Abu Dhabi Council for Economic Development: In Which Strategic Subsectors can Abu Dhabi be Globally Competitive in the Face of the Emergence of Low Wage, High Skill Knowledge Workers?

Schwalje: The Abu Dhabi Economic Vision 2030 outlines several economic sectors for growth and diversification.

  • Energy – Oil & Gas
  • Petrochemicals
  • Metals
  • Aviation, Aerospace, and Defense
  • Pharmaceuticals, Biotechnology, & Life Sciences
  • Tourism
  • Healthcare Equipment & Services
  • Transportation, Trade, & Logistics
  • Education
  • Media
  • Financial Services
  • Telecommunication Services

An extremely important next step in moving towards a knowledge based economy will be closely scrutinizing the industries identified in the Abu Dhabi Economic Vision 2030 for particular industry subsectors that are economically viable given the emergence of low wage, high skill knowledge workers in emerging economies, have the potential to offer wages that are attractive relative to reservation wages established by the public sector, present the possibility of developing a sustainable cost advantage, and which national workforce skills can be developed to provide the human capital required to grow the industry.

For example, research on the emerging renewable energy industry in the UAE found that the majority of firms which operate in the industry are concentrated in lower value added, downstream activities like installation, maintenance, and trading. Very few firms currently operate in higher value added, knowledge intensive industry segments like manufacturing, consulting, and finance. While such industries are in an emergent stage, it is unclear, if they remain concentrated in lower value added segments, whether their impact on economic development will be as significant as planned.

Abu Dhabi Council for Economic Development: What are Some of the Challenges Faced by Countries in Developing Knowledge Economies?

A historical example from the Arab World of the perils of inadequate skills development paralleling foreign and domestic investment is Muhammad Ali’s attempt to industrialize Egypt through the establishment of a textile industry in the 1800s. In 1819, Muhammad Ali began an industrialization drive using imported foreign technicians and investment which led to the establishment of 30 modern factories for textile manufacturing. By 1830, these factories employed 30,000 but within a decade all the factories had failed due to lack of technical skills, European competition, and increased production quality in Europe. At the time, French and English technical superiority and lower labor and raw material costs allowed the Europeans to displace Egyptian imports to Europe. Egypt also faced skills shortages related to engineers and mechanics who could operate, repair, or make innovative improvements to imported technologies which led to obsolescence of Egyptian textile equipment. English free trade concessions further led to industry decline, and by the 1840s Egypt was relegated to a supplier of raw materials to the European textile industry and a net importer of finished textile products from Europe. Despite significant investment in the sector, 87% of cotton in Egypt continued to be processed with manual, time consuming, inefficient methods until 1860 when state of the art steam technologies were introduced due to favorable competitive opportunities for Egyptian cotton resulting from decreased global supply from the US during the American Civil War.

One of the key challenges we have identified in our work with Arab countries pursuing knowledge-based development strategies in the region is the lack of effectiveness of skills formation systems. Our research shows that lack of effectiveness of Arab skills formation systems influences Arab firms to contest lower-skilled, non-knowledge intensive industries at the detriment to regional competitiveness and knowledge-based economic development. Adaptability and congruence of skills formation systems and constituent actors in response to factors such as economic development, skill demands of employers, technological progress and industrial strengthening, and macroeconomic trends is critical to knowledge-based development in the Arab World. Thus, the movement of many Arab countries towards knowledge- based economic development inevitably requires the transition to more effective skills formation systems.

Our research on the region has shown four primary requirements to develop skills formation systems for knowledge economy:

Governments must link economic development with education and training

Key roles

  • Coordination: Ensuring effective institutions to prevent market failure, underinvestment in skills, provide adequate regulation, and coordinate stakeholders
  • Aligning macroeconomic policy with skills formation: Educational and industrial policy interventions must be set in place so that education and training systems co-evolve with industry development.
  • Broad-based, inclusive skills formation: National skills formation systems must support the workforce presently employed in or entering the formal sector as well as individuals who are self-employed, working in informal sectors, or unemployed.

Education and training systems must produce human capital in the quantity and quality required by the labor market

Key roles

  • Ensuring relevancy and employability: Governance, policy, and coordination mechanisms that link educational systems to specific labor market outcomes avoid supply-demand informational gaps regarding skills trends and ensure skill alignment with the needs of employers
  • Quality Assurance: Adoption of performance-oriented, rather than expansion focused, approaches to improving quality, increasing performance, and assuring student marketability
  • Expanding Access: Programs to develop skills amongst those disadvantaged by inadequate investment

Employers need to take a longer term approach to skills formation for knowledge-based development

Key roles

  • Workforce Investment: Employers must be committed to continuous, regular on the job training and knowledge transfer in response to high-performance workplace organization and skills relevancy but also remediating inadequate pre-employment general skills
  • Workforce Development: Cooperation of education and training institutions, the business community, and governments to provide individuals with gainful, rewarding employment as well as firms obtaining the skills in the quantity and quality required

Individuals must be able to make informed choices about their investments in particular skills sets and continuously upgrade their skills

Key roles

  • Investment optimization: Individuals must seek out information on the future trajectory of industries and emergent skills needs, the returns to investing in particular skills sets, returns of education and training investments when calibrating their education and training decisions
  • Lifelong-learning: Individuals must be committed to continuous learning throughout all stages of life for the purposes of community engagement, the workplace, development, and well-being
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The embrace of the Smart City concept is a key cornerstone of the UAE’s national development policy. Strong government commitment has been made to the use of Information and communications technology (ICT) to transform life and work in the UAE in fundamental ways. These investments in human capital and ICT infrastructure are expected to generate sustainable economic growth as well as lead to a higher quality of life.

Developing an affordable, high-speed communications network as an infrastructure backbone to enable smart cities has long been an objective of the UAE government. In 2006, the General Policy for the Telecommunications Sector in the State of the United Arab Emirates set out the goal of providing universal, affordable access to ICT services. Though the UAE has not set specific targets for ICT access and use at the national level or specific targets for gender equity, evidence suggests that the UAE is targeting 100% access for all individuals. Based on a recent household survey conducted by the UAE Telecom Regulatory Authority, 99% of UAE nationals have mobile phones, 95% of households have computers, and 84% of households have an internet connection. These statistics point towards a universally high level of ICT access and use in the UAE with sufficient resources and will to achieve full national ICT penetration.

Broadband Affordability is An Emerging Policy Imperative

While nearly universal internet access has been achieved, an additional imperative for public leaders remains ensuring affordability. This challenge is particularly critical in enabling entrepreneurship and ensuring the global competitiveness of the nation’s small and medium-sized businesses. In a global comparison of the prices of entry-level fiber broadband packages for small and medium-sized businesses, Tahseen Consulting’s analysis shows that UAE businesses are being charged significantly more than small and medium-sized businesses globally.

Global Comparison of Entry-level Fiber Broadband Packages for Small and Medium-Sized Businesses

Doing Business RankingCountryCompanyPackageDownload SpeedCost per monthData Limit
1SingaporeSingteleVolve for SMEs30 Mbps$69.70Unlimited
2New ZealandSparkBasic Business12 Mbps$52.11200 GB
3DenmarkTDCTDC BizBase15 Mbps$43.06Unlimited
4KoreaSK BroadbandOptical LAN100 Mbps$28.62Unlimited
5Hong KongHong Kong Telecom@Work Broadband30 Mbps$38.45100 GB
6UKBritish TelecomBT Infinity Unlimited38 Mbps$48.16Unlimited
7United StatesComcastStarter16 Mbps$69.95Unlimited
8SwedenTeliaTelia Office10 Mbps$57.21Unlimited
9NorwayTelenorBroadband Enterprise6 Mbps$40.27Unlimited
10FinlandSoneraSmall BusinessUp to 200 Mbps$37.60Unlimited

An analysis of entry-level fiber broadband packages for small and medium-sized businesses in the top 10 highest ranking countries on the World Bank’s Ease of Doing Business Ranking shows that the average price per megabyte of download speed is $3.61 (excluding Korea and Finland which have national broadband policies that have promoted extremely fast broadband access at prices that are far cheaper than global comparators). At an average price per megabyte of download speed of approximately $18, the common entry-level fiber broadband packages offered in the UAE to small and medium-sized businesses cost 5 times more than similar packages offered in the leading countries in the World Bank’s Ease of Doing Business Ranking. Businesses in the UAE also pay up to 2 times more than similar broadband packages offered to residential consumers.

Making Broadband More Affordable for Small and Medium-Sized Businesses

The price of broadband access for small and medium-sized businesses is critical to realizing the UAE’s smart city ambitions as well as enabling the nation’s entrepreneurs to compete effectively on a global scale. According to the International Telecommunication Union (ITU), increased competition is an effective mechanism to lower prices. ITU research shows that   duopolies lead to limited price competition which can reduce prices, but markets with more than three licensed operators experience the greatest falls in prices. Policy makers can also address affordability by regular monitoring, price regulation, and tiered services that ensure the revenue maximization objectives of telecom operators are aligned with broader national development strategies. Based on an international benchmark average price per megabyte of download speed of $3.61, implied monthly fees for entry-level broadband services for small and medium-sized businesses which would align the UAE with the most business friendly countries globally are shown below.

Implied Monthly Fee Schedule for Entry-Level Broadband Packages for Small and Medium-sized Businesses Based on International Benchmarks

Download/Upload SpeedImplied Monthly Fee (AED)
10Mbps/2MbpsAED 132.49
12 Mbps/3 MbpsAED 158.98
20Mbps/5MbpsAED 264.97
24 Mbps/6 MbpsAED 317.97
40Mbps/10MbpsAED 529.95
50 Mbps/12 MbpsAED 662.44
60Mbps/15MbpsAED 794.92
72 Mbps/20 MbpsAED 953.91
100 Mbps/25 MbpsAED 1,324.87

What’s At Stake

There are a growing number of SMEs using ICT to establish and grow their businesses. The UAE is the home to several ICT-based startups in the fields of internet search, employment, group buying, payment gateways, online retail, and real estate. While national studies such as the Global Entrepreneurship Monitor have quantified the approximate rate of entrepreneurship and employment impact in the UAE, they have not focused specifically on the additionally of ICT-based businesses on economic growth and employment generation.

The Global Entrepreneurship Monitor shows that the UAE has one of the lowest rates of total entrepreneurship activity of innovation-driven economies, and only 2.3% of new ventures are medium-tech or high technology ventures. Only 14% of entrepreneurial ventures created more than 20 jobs. These rather incomplete statistics suggest that the majority of firms in the UAE do not leverage ICT as the basis for their businesses, and the low number of such technology-driven ventures may not have a significant impact on employment creation without more focused government support. A good place to start is increasing affordability of entry level broadband packages to support the nation’s emerging entrepreneurship ecosystem.

Sources for Pricing Information
Singtel (Singapore): https://smemobile.bizportal.singtel.com/business/broadband/index.jsf
Spark (New Zealand): http://www.spark.co.nz/business/shop/internet/plans-and-pricing.html
TDC (Denmark): https://erhverv.tdc.dk/loesninger/internetabonnementer
Comcast (United States): http://business.comcast.com/internet/business-internet/plans-pricing
SK Telecom (South Korea): https://biz.skbroadband.com/data/data/Page.do?retUrl=/data/data/OpticLan
Hong Kong (Hong Kong Telecom): http://www.biz.netvigator.com/eng/bc_at_work_broadband_services.php
United Kingdom (British Telecom): http://business.bt.com/broadband-and-internet/fibre-broadband/
Sweden (Telia): http://www.telia.se/foretag/losningar/produkter/telia-kontor?intcmp=foretag-telia-kontor-host2015
Norway (Telenor): http://www.telenor.no/bedrift/bredband/
Finland (Sonera): https://www.sonera.fi/yrityksille/tuotteet+ja+palvelut/internetyhteys+toimistoon/yritysinternet/
UAE (DU): http://www.du.ae/smallbusiness/fixed/broadband/broadband-professionals
UAE (Etisalat): http://www.etisalat.ae/en/business/products-and-services/products/internetdata/business-super-overview.jsp

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When it comes to news on socio-economic trends in the Arab World, government and business leaders turn to Trends Magazine. Tahseen Consulting is honored to have its insights on emerging trends in Arab philanthropy featured in the publication’s September issue.

Tahseen Consulting’s Chief Operating Officer, Wes Schwalje, spoke with Nikhil Inamdar, a leading voice on key business trends in the region, regarding the region’s transition from charity to strategic philanthropy. In a wide-ranging discussion, Schwalje discusses recently launched large scale philanthropic initiatives, emerging trends in strategic philanthropy, and what the future holds for Arab philanthropy.

Tahseen Consulting's insights on emerging trends in Arab philanthropy are featured in Trends Magazine's September issue

Tahseen Consulting’s insights on emerging trends in Arab philanthropy are featured in Trends Magazine’s September issue.

Nikhil Inamdar: What are the latest trends being witnessed in Arab philanthropy?

Schwalje: The three most transformative trends I see now are as follows:

High Net Worth Individuals Are Playing an Increasing Role: In 2010, Berkshire Hathaway CEO Warren Buffet and Microsoft co-founder Bill Gates established the Giving Pledge to persuade American billionaires to donate at least half their wealth to philanthropy or charitable causes either during their lifetime or after their death. This initiative has since been broadened to include philanthropists globally. In 2012, Tahseen Consulting conducted a study in which we looked at the potential impact of Arab billionaires signing the giving pledge. At the time, we estimated that $24 billion could be mobilized if Arab billionaires signed a pledge to donate their wealth to philanthropy. While many high net worth individuals have a strong tradition of giving informally, we are witnessing more wealthy Arab individuals making large scale philanthropic contributions transparently and publicly. Their motivations are no different from philanthropists in other parts of the world – wanting to give back to those less fortunate, gaining public recognition and social capital, establishing a legacy, and playing a greater role in shaping their country’s or region’s future. The $1.1 billion donation of Abdullah Ahmad Al Ghurair to capitalize a private foundation and Prince Al Waleed bin Talal’s pledge to direct most of his $32 billion in wealth to philanthropy, we are potentially witnessing a new phase of Arab philanthropy. We are likely to see several more of the Arab World’s approximately 36 or so billionaires making sizable pledge to philanthropic initiatives to strategically manage their wealth for the greater good.

The Transition from Charity to Strategic Philanthropy: In the past, charity in the Arab World was motivated by individual, unpublicized initiatives to give back to local communities. Giving was often focused on societal issues affecting local communities like poverty, housing, and heath care. Arab philanthropy historically has been individually motivated acts of kindness that did not typically address the root cause of societal issues. In the late 2000s, we witnessed a significant push in the region to institutionalize charity, philanthropy, and corporate social responsibility to make philanthropic efforts more strategic. This push towards philanthropic investment and strategic philanthropy remains rooted in the region’s religious traditions of Zakat and Waqf. In the early 2000s, many philanthropic efforts could still be characterized as donations to fund program execution by nonprofits. Philanthropists were primarily concerned about programmatic execution commensurate with the size of their donation with little regard for measuring impact and enhancing institutional capacity. A pivotal watershed occurred in 2007 when Sheikh Mohammed donated $10 billion to endow his namesake foundation the Mohammed bin Rashid Al Maktoum Foundation. The scope of this philanthropic gesture catalyzed a number of dialogues in the region about strategic philanthropy. The late 2000s saw the emergence of a number of endowed foundations in the region that began investing resources into nonprofit enterprises in order to increase their capacity to address the root causes of regional development challenges. By 2015, a number of the initiatives launched in the early 2000s and earlier have adopted strategic approaches to philanthropy which involve building internal capacities to deliver programs, developing the institutional capacities of nonprofit partners and grant recipients, pursuing programs with well thought out approaches that address the root causes of development issues, and strong systems of monitoring and evaluation to measure impact and value for money.

Arab Philanthropy is Playing an Increasingly Important Role in Global Development: Many of the region’s philanthropic institutions have become involved in international development and engage regularly with multilateral institutions and bilateral donors. Increasingly large Arab philanthropic initiatives have been able to shape the policies of multilaterals and bilateral institutions through their funding, provide input on program design and development, and contribute funding for scaling up successful initiatives.

Nikhil Inamdar: What distinguishes Arab philanthropy from global philanthropy?

Schwalje: In addition to the relationship between philanthropic giving and religious traditions, a unique aspect of philanthropy in some of the Arab countries is the emergence of hybrid foundations which are funded by government or quasi-governmental funds and private donors. In other regions, public charities generally receive their funding from the public through grants from individuals, government, and private foundations, while private foundation generally receive funds from a single source, such as an individual, family, or corporation. In this respect, the definition of what constitutes a charitable organization and to whom it should be held accountable is not as clear cut as elsewhere. Adding to this confusion is the fact that many of the region’s philanthropists wear multiple hats in business and government.

Nikhil Inamdar: What will need to happen in terms of regulation etc. for this segment to mature like the way it has in Western economies like the US?

Schwalje: In many Arab countries, civil society laws make the registering of philanthropic organizations immensely difficult and can preclude fund raising. Such laws have the potential to negatively influence the development of civil society. Laws which might also serve to motivate individual giving and corporate philanthropy, such as tax deductible charitable giving, are also lacking. Emerging forms of philanthropy, such as venture philanthropy and crowdfunding, currently exist in regulatory grey areas which require regulation to ensure they can thrive in the region.

Nikhil Inamdar: Does philanthropy need to become more organized in terms of impact assessment, audit etc. so as to give the sector a more formal structure?

Schwalje: Several elements are required to Advance Arab Philanthropy:

Mapping Giving Patterns: More effort is needed to map philanthropic giving to determine what entities are giving and to whom in order to identify unmet needs. An interesting initial attempt to map private philanthropic contributions is the UAE’s Annual Foreign Aid Reports which included information on giving by many of the UAE’s philanthropic organizations. More information on giving patterns with promote coordination and reduce overlap of efforts.

A Focus on Improving Delivery Capabilities of Beneficiaries Linked to Funding: In many cases, regional nonprofits lack the capabilities and internal controls to absorb and manage large-scale donor contributions. This has promoted a tendency of Arab philanthropists to work with international organizations over home-grown Arab institutions. Capacity strengthening of Arab donor recipients linked to philanthropic contributions will be required to strengthen the region’s civils society institutions to deliver more effectively on large-scale initiatives and attract larger philanthropic donations.

Improved Capabilities to Analyze Value for Money: Because of the youth of strategic philanthropy in the region, there are several organizational capabilities that philanthropic organizations need to improve. This includes identifying program objectives to determine the strategic intent and envisioned impact of initiatives, examining the ongoing relevance and validity of programs, ensuring efficiency and economy of activities, and assessing the impact of programming.

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