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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.

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.

Tahseen Consulting’s conceptual model for the governance of national workforce skills development systems was recently cited in an analysis of Romania’s lifelong learning system for knowledge-based economic development.

View Our Work on National Skills Formation Systems for Knowledge-based Economic Development

A Conceptual Model of National Skills Formation for Knowledge-based Economic Development in the Arab World

Similar to the Arab World, the findings from Romania indicate that government interventions are needed to align the education and training system with macroeconomic development as well as resolve issues that discourage individuals from participating in lifelong learning.

As Arab countries pursue knowledge-based economic development, national skills formation policies require significant rethinking says a new report from Tahseen Consulting in collaboration with the Sheikh Saud bin Saqr Al Qasimi Foundation for Policy Research

August 20, 2013 – Dubai, UAE – Nearly all of the countries in the Arab World have adopted development of a knowledge-based economy as a policy objective to meet economic, political, and social objectives. Policies aimed at catalyzing knowledge-based economies are highly related to job creation, economic integration, economic diversification, environmental sustainability, and social development. While the advantages of knowledge-based economic development have become clearer, so too have the challenges of implementing related policies. A Conceptual Model of National Skills Formation for Knowledge-based Economic Development in the Arab World, a new report by Tahseen Consulting, developed in collaboration with the Sheikh Saud bin Saqr Al Qasimi Foundation for Policy Research, provides a framework and best practices from the Gulf Cooperation Council for helping governments align skills formation policies with knowledge-based economic development.

A copy of the report can be downloaded at http://www.alqasimifoundation.com/en/Publications

National Skills Formation for Knowledge-based Economic Development

Beginning in the 1990s, there was a shift in the Arab World away from viewing education and training systems as solely suppliers of skills toward an emphasis on the relationship between governments, educational systems, labor markets, and firms to generate demand for skills. By adopting demand-driven, ecosystem approaches to skills formation, Arab governments can align education and training systems with high-growth sectors of industry for knowledge-based economic development and achievement of accompanying economic, political, and social objectives.

While many international models of skills formation promote an exclusively market based approach, several Arab countries view investment in human capital as a political and economic goal in which significant government intervention is warranted. Yet, many previous attempts at skills formation policy have failed to address persistent skills development problems and do not present a comprehensive strategy to develop the skills of the national workforce as a whole. Despite the need for countries to adopt demand-driven approaches to skills formation, many of the countries in the region have pursued policies with no clear link between key stakeholders and specific economic outcomes.

“The changing demands of knowledge-based economic development create a need for interdependence and collaborative networks for effective skills formation, said Wes Schwalje, Chief Operating Officer of Tahseen Consulting and author of the report. “The widespread regional pursuit of knowledge-based economic development is driven by policies that envision the emergence of high skill, high wage economies that will create jobs. However, the global availability and growth of low cost, high skill workers potentially threatens the viability and economic fundamentals of sophisticated, innovation-driven knowledge-based industries taking root in the region if skills formation challenges are not addressed.” 

The Need for a New Approach

The changing demands of knowledge-based economic development, global macroeconomic trends, and social development, create a need for interdependence and collaborative networks consisting of education and training providers, firms, government entities, and other key stakeholders for effective skills formation. Citing good practices of skills formation policy from across the Gulf Cooperation Council countries, the report presents a framework via which countries can analyze their skills development systems.

“Arab skills formation system reforms must challenge the assumption that more education is always better,” said Walid Aradi, Chief Executive Officer of Tahseen Consulting. “Particularly in non-resource rich Arab countries, governments must reconsider the full employment promise which hampers global competitiveness, reduce wage inequality to ensure equal distribution of wealth, and determine the Arab world’s position in a global economy with emerging low cost, high-skill competitors that challenge knowledge based economic development both in the developed and developing world.”

While some Arab countries are more suited to competing in a high-skill, low-wage global economy, other Arab countries which are unable to compete in high-skill, high-wage knowledge-based industries will need to adequately calibrate the expectations of their citizens regarding the types of jobs that will be available in the future. They will also have to account for the likely instability of salaries due to wage compression from competing low-wage, high-skill workers. Efforts in the region to privatize education attainment so that labor market success or failure passes the burden on to individuals are prone to market failure without sufficient demand for skills from the labor market. If knowledge-based industries fail to take root and lead to employment, many of the reforms and money spent on higher education expansion, education quality, R&D ecosystems, and entrepreneurial growth could be deemed inappropriately spent.

We have placed a recording of the webinar on our website at: http://www.tahseen.ae/r&iopengovernment.html#header

You can also download Tahseen Consulting’s accompanying study An Arab Open Government Maturity Model for Social Media Engagement. The study challenges previous models of e-government and open government maturity based on the experiences of Western countries by offering region-specific guidance that accounts for the unique governance tradition of Arab public sector entities. The report describes organizational changes government leaders can make to help their agencies leverage social media to complement national strategies to increase citizen participation. 

We have placed a recording of Tahseen Consulting and EDUonGo’s webinar on The Future of Educational Technology Use in Arab Education and Corporate Training in the Tahseen Academy on EDUonGo. To view the webinar:

  1. Visit http://tahseen.eduongo.com/v2/?params=website/web/course_catalogue
  2. Click the eWorkshop: The Future of Educational Technology Use in Arab Education graphic
  3. Enter the course code N7R29O
  4. Enter your name, e-mail, and a password

Hear how Arab educators are using educational technologies and learn how you can use them more effectively to implement innovative teaching approaches

With the increased adoption of high-speed internet access and mobile devices in the Arab World, education institutions face the challenge of meeting the new expectations of learners who want engaging, interactive, and individualized learning experiences.

Join Tahseen Consulting and EDUonGo for a free 30 minute webinar to learn how Arab educators are currently using educational technologies and discover how new, cloud based technologies will shape the future of regional education.

REGISTER HERE: http://tahseen.eventbrite.com

Speakers

You will hear directly from two pioneers in educational policy and technologies in the Arab region:

• Walid Aradi, CEO Tahseen Consulting

• Ridvan Aliu, CEO and Founder of EDUonGo

Participation Bonus

When you sign up for the webinar, you will receive free access to EDUonGo, a cloud-based software as a service learning management system which is being rapidly adopted by educators in the Arab region to offer mobile learning experiences to their students.

REGISTER HERE: http://tahseen.eventbrite.com

Majority of Arab higher education professors still use traditional face-to face teaching methods shying away from educational technologies

Tahseen Consulting released a study entitled “Educational Technology Usage in Arab Higher Education” which explores the use of educational technologies by university professors in 17 countries in the Arab World. The study results show that Arab educators are significantly trailing behind their peers globally in utilizing educational technologies which have been shown to increase student engagement, access, enrollment, retention, and graduation rates.

Obtain a Copy of the Study

To obtain a copy of the study “Educational Technology Usage in Arab Higher Education” please go to http://tahseen.eduongo.com.

Due to the region’s youthful demographics and widespread use of mobile technologies, Arab educators face the challenge of meeting new expectations of learners who want engaging, interactive, and individualized learning experiences.

This is one of the largest studies to look at the use of educational technologies in Arab higher education institutions,” Walid Aradi, Tahseen Consulting’s CEO and leader of the study, said.

For the study, Tahseen Consulting analyzed data from 250 respondents in public and private higher education and technical and vocational training institutions across the Arab region. Participants were asked about their awareness of educational technologies, use of technology to complement teaching, and satisfaction with the functionality and language options offered by technology providers.

The study results show that only 11% of Arab higher education professors actively use educational technologies such as learning management systems in their classrooms. Regional usage rates are substantially lower than the 93% of professors in the United States who use educational technologies to introduce blending learning approaches to their classrooms.

“Blended learning approaches have been adopted globally to combine face-to-face teaching with online content and collaboration tools that allow professors to better communicate with students, allowing them to spend more time on learning activities”, said Aradi. “The study results highlight the widespread prevalence of traditional, face-to-face instruction in the Arab World indicating the region is trailing behind other countries in adopting modern pedagogical approaches in higher education,” he added.

When asked about the reasons they do not use technology in the classroom, Arab professors point towards an institutional culture that fails to promote the use of technology in teaching, lack of training, and poor IT infrastructure. To move beyond face-to-face methods of instruction, Arab higher education institutions need to highlight the effectiveness of new technologies on student outcomes and train professors. Educational technologies can play a significant role in ensuring the academic success of Arab youth who have embraced mobile technologies and have come to rely on high-speed internet access.

Wes Schwalje, co-author of the study commented, “Despite internet use in the Arab World increasing 27 times over the last decade, which is one of the highest growth rates in the world, Arab higher education professionals continue to rely on traditional face-to-face teaching strategies that do not incorporate technology.”

Arab educators, particularly at the largest institutions in the region, are not satisfied with commercially available technologies presently in the market. When asked how satisfied they are with current educational technologies available at their institutions, Arab higher education professionals show high levels of concern with the regional applicability of functionalities and language options. The implication is that Arab educators appear to avoid integrating technology in their classrooms due to this dissatisfaction.

“Educators are increasingly demanding technologies that are easy to use, improve efficiency, are mobile device friendly, and which provide collaboration tools that leverage social media,” says Ridvan Aliu, CEO of EDUonGo, a recent entrant to the region and contributor to the survey. “Emerging cloud-based software as a service can help institutions educate and retain students, improve institutional management, increase staff productivity, and make the lives of students easier.”

Obtain a Copy of the Study

To obtain a copy of the study “Educational Technology Usage in Arab Higher Education” please go to http://tahseen.eduongo.com.

About the Study

Tahseen Consulting conducted the study in late 2012. The study included an English and Arabic survey of 250 professors and administrators at 100 higher education institutions in 17 countries in the Arab World.  Both public and private higher education institutions were included in the sample frame. Respondents were asked about all commercially available learning technologies widely available in the region and globally.