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In this Insights at the Edge of Government Analysis Flash, we look at the number of Facebook data and content restriction requests from MENA Governments. We found that a select few countries are making a significant number of the requests. To preempt such requests and establish deeper relationships with regional government focused on their positive net contributor role in the community, Facebook employs an escalated government engagement approach.

The broader MENA region made over 7,600 government data and content restriction requests to Facebook in 2016

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In a brief interview with Abu Dhabi Chamber of Commerce and Industry, Tahseen Consulting’s Wes Schwalje talks about Abu Dhabi’s race to become a global FinTech hub. This race is not just about superlative bragging rights, though Abu Dhabi Global Market’s Reglab is the first FinTech regulatory sandbox and framework in the MENA region. The economic stakes are real and significant with FinTech having the potential to become a key pillar of the Arab World’s socio-economic development.

Abu Dhabi Chamber of Commerce and Industry: Why is Abu Dhabi so attractive to FinTech companies?

Schwalje: In 2016, the Financial Services Regulatory Authority published a consultation paper seeking industry views on a FinTech legislative framework. This consultation led to Abu Dhabi Global Market establishing the Arab World’s first FinTech regulatory regime and regulatory laboratory. The initiative follows in the footsteps of similar competing FinTech regulatory sandboxes in countries such as UK, Singapore, Hong Kong, and Australia which are all vying to become FinTech hubs. These cities are all providing a safe space for FinTech businesses to test innovative products, services, and business models without having to initially comply with more traditional legal and regulatory requirements for the financial services sector.

The more recent commitment Abu Dhabi has shown to embracing FinTech as well as its traditional role as a strong player in the regional financial services sector make it a very attractive base for more established financial institutions exploring Fintech as well as startups experimenting with innovative financial products or services. The embrace of FinTech in the UAE is an evolution of the initial vision to position the country and its constituent Emirates as a unified international financial services hub offering a full spectrum of financial services comparable to other leading global financial centers. Abu Dhabi provides the regulatory framework, safe space to innovate, strong government support, and commitment to a long-term vision that financial services companies look for when it comes to pushing the innovation frontier. Additionally, there are several regional factors which make Abu Dhabi attractive. Though estimates vary significantly, the unbanked population in the Arab World is estimated at upwards of 80%. Traditional commercial banks continue to dominate lending with weak service provision for small and medium sized businesses which make up more than 90% of most Arab economies. Estimated at $7 billion, e-commerce across the Arab World is booming with a youthful, technology embracing demographic which are first movers when it comes to embracing technological innovation.

Abu Dhabi Chamber of Commerce and Industry: How could FinTech help improve the Middle East and Abu Dhabi?

Schwalje: It is not clear at this time what the full range of possible use cases for FinTech will be in the region, but a few macro trends are emerging based on the startups in region and competitive pivots of more established financial services firms. The payments industry is becoming more competitive with FinTech players challenging traditional payment firms’ intermediary role by offering more direct, faster, and cheaper services. We are seeing significant innovation in mobile wallets, crypto-currencies, and block chain technology as well as mobile banking surging. Digital and mobile-based payments will likely replace traditional card-based payments and make some traditional payment channels like ATMs and point of sale technologies obsolete. Block chain-driven payment infrastructure, which Dubai is pioneering, have the potential to significantly reduce payment processing costs. Web-based insurance aggregators are challenging the dominance of more traditional market players. We will see the increased use of big data by financial institutions to more effectively serve SMEs and previously unbanked populations with tailored deposit and lending facilities. Online platforms have already caught on as an alternate funding platform for entrepreneurs seeking early-stage finance to counter the lack of risk capital and commercial loan options for startups and SMEs in the region. Right now we are at very interesting stage in the evolution of FinTech regionally in which there remains significant big addressable markets that are currently untapped.

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In a brief interview for Computer Weekly, Tahseen Consulting’s Wes Schwalje talks about the future of IoT and the need for regional stakeholders to get a lot more serious about personal data privacy and connected device security.

Computer Weekly: Which GCC sectors could benefit most from IoT – and why?

Schwalje: Due to the concentration of economic activity in the GCC in a handful of sectors such as the extractive industries, manufacturing, government services, construction, and utilities we will likely see a concerted effort to disrupt and digitally transform these traditional industries with IoT. Specific sub sectors of focus will likely be oil and gas, petrochemicals, aviation, and, pharmaceuticals as well as government services such as healthcare, education, and utilities. In these traditional sectors, industry incumbents will either take on new roles or be displaced by new industry structures due to digital disruption. A good example of this adaptation in the private sector to avoid digital disruption is Mashreq Bank’s recent announcement about its new digital only spin-off unit. In terms of government services, several GCC governments are deploying IoT as part of smart city initiatives to enhance government service provision, we are seeing interesting connected healthcare pilots emerging like telehealth systems in Saudi Arabia, and there is a significant push to leverage IoT to address transport challenges regionally. At the same time, increasing economic diversification in the GCC, driven primarily by growth in the services sector, is likely to lead to innovative IoT applications in emerging services sectors such as transport and logistics, telecommunications, financial services, and tourism. In the very near future, IoT will become a key aspect of GCC economic diversification strategies and ultimately global and regional competitiveness.

Computer Weekly: How might life in the GCC look different in ten years, due to IoT technology?

Schwalje: The data gained from IoT is the foundation for a range of emerging technologies such as machine learning, robotics, automation, 3D printing, artificial intelligence, and augmented. For this reason, we will see a significant uptake of IoT over the next decade. Data is quickly becoming vital to the profitability and success of GCC businesses as well as enhanced efficiency and effectiveness of government service delivery. In terms of specific applications of IoT, we are likely to see smart asset monitoring, employee tracking, energy consumption monitoring, product usage and monitoring, business process automation, smart security, and wide area control systems. While the potential of IoT in the GCC is promising, more effective, consumer-oriented laws and regulations on data in the GCC and throughout the Arab World are needed to address how data can be obtained and used, how long data can be kept, and limits on access by third or other government related-parties. A modern, harmonized GCC data protection framework is a critical requirement to maximize the benefits of the IoT.

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Tahseen Consulting recently explored how the telecom industry in the Arab World is supporting technology-driven startups and small and medium sized businesses. We interviewed executives and innovation leaders at 55 telecom companies to get their perspectives on how companies are supporting technology entrepreneurship and what can be improved. Here are our results.

Telecom Industry Support for Technology Entrepreneurship in the Arab World

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Abu Dhabi Chamber of Commerce and Industry (ADCCI) recently sat down with Wes Schwalje, COO of Tahseen Consulting, to discuss the United Arab Emirates’ plan to become a regional and global themed entertainment destination with its sizable investments in theme parks.

ADCCI: What value do theme parks bring to the UAE’s tourist proposition?

Schwalje: In 2016 the World Travel and Tourism Council estimated travel and tourism contributed approximately $227 billion to Arab economies and employed approximately 6 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.

In the UAE, travel and tourism has been identified as a key sector for economic growth and diversification. According to the World Travel and Tourism Council, in 2016, travel and tourism contributed $43 billion to the UAE economy. For this reason, the UAE has invested significantly in the travel and tourism sector to position itself as a destination of choice for international leisure and business travelers. The UAE’s more recent investments in theme parks complement the country’s already significant legacy investments in world class resorts, hotels, golf courses, and other attractions. Theme parks fill an existing gap in the types of visitor attractions the UAE offers. The UAE is world-renowned for its beaches and adventure tourism given its unique ecosystem. Over the last decade, it has launched a number or sporting, culture, shopping, and festivals which have been effective tourist draws. Heritage tourism has received a lot of investment in the run up to Expo 2020. Theme parks serve as an additional strategic lever in the UAE’s competitive strategy to attract tourists. However, it should not be ignored that some studies have shown that typically, residents from within 1.5 to 2 hours of a theme park, can account for as much as 80% of theme park visitors.

ADCCI: What kind of traveler will theme parks attract?

Schwalje: The business proposition of UAE theme park investments is rooted in the oft cited statistics that 6 billion people live within eight hours flying time to the UAE and Dubai and Abu Dhabi airport passenger traffic collectively amounts to approximately 100 million people. The idea is to convert these travelers into theme park guests. Based on the top source markets for UAE visitors, theme parks are likely to attract travelers from India, Saudi Arabia, United Kingdom, Oman, Pakistan, US, China, Iran, Germany, and Kuwait. However, it remains unclear how the UAE theme park might ultimately evolve. For example, key theme park clusters in Florida and California in the United States have carved out a niche which attracts visitors that are ready to travel long distances and stay in parks for long periods. In Florida, for example, overseas visitors have an average length of stay just above 10 days. In the UAE, the average length of visitor stay is approximately 4 days. So it is unclear if the UAE theme park market will evolve similar to the model of California and Florida or if it will evolve more closely to European or Asian theme park markets which often have considerably shorter lengths of stay and cater largely to more proximal geographic markets.

ADCCI: What kind of peripheral spends will these travelers bring?

Schwalje: Based on visitor spending trends globally, in addition to direct tourist spending on accommodation, transport, and entertainment, theme park tourists will also bring significant spending on shopping, sightseeing, dining, and other recreational activities. The indirect and induced spending impacts from tourism can be as significant as or higher than the direct contribution of travel and tourism to GDP. This implies that extending visitors’ length of stay should be a key priority for UAE tourism promotion authorities and key stakeholders.

ADCCI: How should the UAE optimize theme park segmentation? What types of parks work best?

Schwalje: To maximize revenues, UAE theme parks will need to quickly transition from selling 7-hour experiences to a 7-10 day experience. This will require doubling the average length of visitor stay in the UAE. While a large scale critical mass of theme parks and attraction is critical, a key challenge will be encouraging overnight stays by increasing suitable accommodation across all market segments.

ADCCI: Do ‘internationally branded’ parks, such as Legoland, offer more value and footfall?

Schwalje: Theme parks generally have two broad strategies for attracting customers: leveraging original local content or global alliances. In the UAE, theme parks have generally chosen the strategy of forming global alliances for intellectual property assets to make their parks appeal to a broader international audience. Empirical studies of the impact of park theming surprisingly show that theming is not particularly significant in driving entry prices and attendance – attractions seem far more important. So there is not conclusive evidence that international branding is a golden ticket to success. However, consumers are becoming more globally aware, and other rapidly developing competing theme park markets, such as China which opened more than 20 theme parks in the past few years, have followed a similar international branding approach to UAE theme parks.

ADCCI: What might theme parks of the future look like?

Schwalje: The theme park industry, like other industries, evolves based on economic conditions, global competition, socio-political developments, and technological developments. An interesting study conducted recently asked over 100 theme park leaders about their views on the future of the theme park industry. A few of the themes that emerged from this study were: top future themes for parks will be interactive adventure, fantasy and mystery, movies and TV shows, science fiction, and space; the family market will always be the target market for parks; operational excellence, such as reduced wait times and dynamic pricing, will become key points of future differentiation; visitors will demand more interactive, personalized experiences; and theme parks will have to offer integrated vacation experiences that include on-property accommodations, food services, recreation, shopping, recreational and entertainment activities, and other tourist services. We see many of these themes playing out now.

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Abu Dhabi Chamber of Commerce and Industry (ADCCI) recently sat down with Wes Schwalje, COO of Tahseen Consulting, to discuss how Abu Dhabi can attract more foreign investment.

ADCCI: What makes a country attractive for foreign investment?

Schwalje: There is widespread agreement that foreign direct investment flows are influenced by the size and growth of the investment destination, stability, openness, and institutional quality. This consensus is built upon a foundation of a number of stylized facts: larger economies tend to attract more foreign investment; trade openness and export orientation have a strong complementarity with FDI flows; sectoral and cluster effects often signal opportunity for foreign investors that increase investment, political and macroeconomic stability attracts investors; and good governance and institutional quality are key FDI determinants. However, emerging research on FDI shows that bilateral trade agreements, investment treaties, and customs unions potentially have a much higher influence on FDI attraction than macro-economic policy factors like business costs, infrastructure, and quality of political institutions. So, in addition to a continuing focus on strengthening the business enabling environment in the GCC, we will likely also start seeing a much stronger focus on bilateral and multilateral trade and investment frameworks.

ADCCI: What credentials can Abu Dhabi leverage to boost and optimize its FDI?

Schwalje: Abu Dhabi currently offers foreign investors a high level of political and economic stability, strategic location, world-class infrastructure, tax incentives, and strong social infrastructure. It is currently the second most preferred destination of foreign investor in the Arab World. However, there are several competing, emerging FDI destinations in the Arab World which raise questions about how investment destinations can further differentiate themselves from competitors.

ADCCI: What sort of FDI related policies and incentives could attract investors to Abu Dhabi?

Schwalje: In general across the GCC, there is a need for deeper reforms to enhance the business enabling environment and simplify investment approval and licensing. One of the most significant concerns of potential investors in the GCC, which the UAE is currently addressing at the federal level, is limitations on foreign ownership and sponsorship requirements often contained in GCC investment laws. Investment laws which give investors greater control over their investments will be critical. Over the longer term, several GCC countries will need to consider if the investor incentives and protections offered by economic and investment zones that primarily target foreign investors should be rolled out more broadly to benefit onshore businesses. Stepped up policies to support small and medium enterprises are needed. A stronger focus on bilateral investment treaties and free trade agreements can build on the achievements GCC countries have made in improving the business enabling environment. Clarifying the role of countries and the Secretariat General of the Gulf Cooperation Council in promoting FDI could also provide a stronger regional framework for FDI attraction.

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Abu Dhabi Chamber of Commerce and Industry (ADCCI) recently sat down with Wes Schwalje, COO of Tahseen Consulting, to discuss the role of small and medium sized enterprises (SMEs) in Abu Dhabi and the region’s development.

ADCCI: How critical are SMEs to the development of a sustainable economy?

Schwalje: SMEs are not just important to regional economies – across the region SMEs ARE the economy. So it is impossible to separate the industrial structure of the Arab World from a discussion about sustainability. Tahseen Consulting conducted a study in 2012 which showed that, if the European Union’s definition of what constitutes an SME is applied to the region, SMEs represent 92% of companies in the Arab region with micro firms <10 employees making up 25%, small firms of 10-49 employees making up 44%, and medium-sized firms with 50 – 250 employees making up 23% of firms. Across the region, these firms employ up to 65% of the workforce depending upon the country. In Abu Dhabi, 95% of the total enterprise population are SMEs which employ 24% of the workforce. While in Dubai, SMEs make up 95% of the enterprise population and employ 42% of the workforce. At the national level, SMEs constitute 94% of the total enterprise population and employ 86% of the workforce.

ADCCI: In particular, which Abu Dhabi sectors would benefit from more SME participation?

Schwalje: The Khalifa Fund estimates that 73% of SMEs in the UAE are in the trade and retail sector, 11% are in services, and 11% are in manufacturing. 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. So technology is a key sector for potential SME growth. It is also important for Abu Dhabi to enhance enterprise creation in the priority sectors highlighted in the Economic Vision 2030. A few Emirates are introducing interesting programs in which large firms in priority economic sectors are working to upgrade SMEs to indigenize their supply chains. These initiatives, which were pioneered by the extractive sector, hold significant promise in building a strong SME base which can not only generate long-term benefits for larger parastatals in the UAE but also broaden the SME base from its traditional focus on trade and retail. Trade and retail cannot provide the high skill, high wage jobs that the UAE aspires to provide for its citizens and residents. Only knowledge-based industries have the potential to do this. However, SMEs in priority knowledge-based industries can’t rely on government contracts alone – they must also be innovative and globally competitive.

ADCCI: What could encourage more SMEs to set up shop in the capital?

Schwalje: Several of Tahseen Consulting’s clients have become interested in the ongoing experiment of Chile in implementing Startup Chile. This initiative has a mission to attract early stage, high-potential entrepreneurs to bootstrap their startups in Chile. It is similar to what the Dubai Future Accelerators initiative is trying to achieve but on a much larger scale. To date, Startup Chile has invested $40 million in accelerating 1,309 startups. These firms are now worth $1.3 billion, have a survival rate above 50%, and created 5,162 positions worldwide. In essence, Chile has achieved a 34x return on its investment while also positioning itself as a global startup and SME hub. We expect to see a lot more Startup Chile type initiatives in the GCC. So national acceleration programs and supply chain indigenization are key strategies that could help attract SMEs to Abu Dhabi and position it as a global startup hub. Such programs would be in addition to resolving the bureaucratic obstacles and barriers to operating an SME in the UAE. It is not enough to gauge progress relative to the quite methodologically flawed World Bank Doing Business Rankings. It is typically the processes which are not measured by such indices that cause SMEs headaches. One particular challenge that comes to mind is cost businesses in eth UAE pay for internet – at an average price per megabyte of download speed of approximately $18, the common entry-level fiber broadband packages offered in the UAE cost 5 times more than similar packages offered by the leading countries in the World Bank’s Ease of Doing Business Ranking.

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Abu Dhabi Chamber of Commerce and Industry (ADCCI) recently sat down with Wes Schwalje, COO of Tahseen Consulting, to discuss how Abu Dhabi Global Market Place is faring after one year in operation and how Abu Dhabi’s plans to establish the UAE as a global MRO and manufacturing hub is evolving.

ADCCI: How might Abu Dhabi Global Marketplace (ADGM) change the economic landscape of Abu Dhabi and the UAE?

Schwalje: Abu Dhabi has traditionally been a strong player in the regional financial services sector. ADGM will enable Abu Dhabi to expand its influence from a regional financial hub focused primarily on commercial and Islamic banking to an international financial center that offers a wider array of financial services such as private banking, wealth management, and asset management. Financial centers like ADGM and Dubai International Finance Center support economic diversification efforts as well as respond to demand for increasingly sophisticated financial services fueled by development. This is why the Abu Dhabi Economic Vision 2030 and Dubai Vision 2021 have a strong focus on increasing economic diversification by developing a sustainable economy which can prosper in a post-carbon era. Over the longer term, the vision is to position the UAE and its constituent Emirates as a unified international financial services hub offering a full spectrum of financial services comparable to other leading global financial centers.

 ADCCI: One year in, has ADGM been a success?

Schwalje: ADGM registered 170 companies in its first year of operation. If you contrast this with the initial tenant attraction of other regional financial centers and free zones, ADGM has had remarkable success. For example, a year after the Qatar Financial Center opened in 2004, it had attracted approximately 50 tenants. Back in 2000 the recently launched Dubai Internet City signed up 180 tenants in its initial year of operation. Three years after its launch in 2008, the Dubai International Financial Center had about 400 tenants. However, the number of companies licensed by ADGM to date does not say much about whether Abu Dhabi is developing a broader financial services industry in line with the Abu Dhabi Economic Vision 2030. ADGM’s true success in becoming a financial services hub will only be apparent in a 5-10 year timeframe, but the initial signs of success that have foreshadowed the success of other industry free zones in the region are there.

ADCCI: Shifting gears a bit, what are Strata’s strengths?

Schwalje: In 2008, the Economic Vision 2030 outlined Abu Dhabi’s intention to become a global player in the aerospace MRO and parts manufacturing segments. Aerospace was chosen as a capital-intensive, export-oriented focus sector that could advance economic diversification and knowledge based economic transformation objectives.

Strong government support for the development of the aerospace sector, investment in aviation infrastructure like Nibras Al Ain Aerospace Park and the Midfield Terminal, as well as the growth of both Dubai and Abu Dhabi as global aviation hubs has ensured that Strata has a strong local market for its products. As one of the largest global purchasers of Airbus and Boeing, UAE national carriers are strong captive domestic customers which Strata has leveraged to grow internationally. The success of Strata is both a function of the support the aerospace industry has received from the Abu Dhabi Government as well as shrewd strategic execution of Strata and its owner Mubadala to build world-class MRO and manufacturing capabilities. Strata has leveraged the capabilities it has built serving domestic customers to become a global supplier to aerospace industry leaders like Airbus, Boeing, Rolls-Royce, and GE.

ADCCI: What might the pitfalls/competition be in the coming years?

 Schwalje: Decreasing passenger unit revenues due to the fall in oil prices, along with foreign currency fluctuations, and pricing pressures are currently a key risk to Strata. For example, in November 2016 Emirates Group reported profits down 64% from the previous year due to strong competition and dampened travel demand. However, the internationalization of Strata’s activities will enable it to better weather industry demand fluctuations that may affect aircraft deliveries and maintenance requirements. Competition from other emergent MRO hubs will likely also present a challenge to Abu Dhabi’s plans to consolidate its gains to continue to build its aerospace sector. For example, India, with its growing aviation sector, skilled workforce, and cost advantages, could present strong competition to Abu Dhabi. Another emerging issue that is still unclear is how the introduction of value added tax in 2018 will affect the sector in terms of competing with foreign MROs.

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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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