Leading the Fourth Industrial Revolution: The UAE Case Study

Leading the Fourth Industrial Revolution: The UAE Case Study

Author: Charif Hamidi

As the world moves into an era of increased connectivity—from the continued global take-up of smartphones, through to mainstreaming of machine to machine communication and the Internet of Things, it is becoming more evident that an industrial revolution centered around exponential speed has been set in motion. Governments worldwide are trying to take advantage of this Fourth Industrial Revolution; however, this phenomenon is quite a doubled edged sword as it bears a unique set of opportunities and drawbacks. On the one hand, this revolution will yield technological innovations that will improve business efficiency and foster a smarter knowledge-based economy. On the other hand, it will create new issues in terms of security and citizen privacy and social inequalities should governments fail to properly regulate such advancements. Citizens are bypassing public services as they continue to embrace digital technologies in their daily lives. The gradual shift from fiat money to blockchain in finance or regulated lines of communication to cross-platform applications and instant messaging freeware in the telecom sectors are but a couple of examples that highlight how the fourth industrial revolution will challenge the power of governments, particularly those in emerging markets where disruption is more evident and less gradual. Think of countries that never experienced landlines and went straight to mobile phones in order to understand this exponential growth and fast disruption of business as usual. It is imperative that government institutions act quickly to not only adopt new technologies, but also leverage them to overhaul and sustain public services.

One particularly country of the emerging markets was visionary enough to quickly realize the urgency to prepare for the fourth industrial revolution. The UAE has set itself a target of being the world leader in adopting the fourth industrial revolution. In fact, it has joined forces with the World Economic Forum (WEF) to establish the first permanent policy unit to study and implement measures regarding the transformation of business and society brought about by technological advances. Furthermore, in the spirit of concretizing its commitment, the UAE government announced an ambitious 6 pillar action plan to adopt the recommendations of the 35 Global Future Councils. Nevertheless, despite such commendable efforts, the UAE still has a long way ahead prior to reaching the fourth industrial revolution pioneer peak. The World Economic Forum’s Global Competitiveness Index (GCI) and Global Information Technology Report (GITR) are some of best indicators to gauge a country’s readiness for the fourth industrial revolution. The Global Competitiveness Report 2016-2017 evaluated the competitiveness landscape of 138 economies, providing insight into the drivers of their productivity and prosperity. The UAE continues to lead the Middle East and North Africa (MENA) region, while enjoying a number of competitive edges in infrastructure as well as goods and labor markets. The index reported that the UAE managed to make modest advancements this year in areas such as technological adoption and business sophistication despite a deteriorating macroeconomic stability due to the decrease in oil prices. Going forward, for the country to diversify its economy, enhancing innovation—where the country currently ranks 25th—will be crucial. There is equal scope for better leveraging digital technologies that are an important enabler of business innovation. As a matter of a fact, the WEF’s Global Information Technology Report ranked the UAE in the 26th position in terms of networks readiness. This report identifies key themes concerning the drivers and implications of the emerging Fourth Industrial Revolution and develops relevant concepts and measures with experts, policymakers, and businesses. The UAE government is leading the way to greater digital connectivity (2nd in terms of government usage), providing a consistent vision for the sector and achieving success at promoting it (1st on both indicators). Individual usage has also further improved (19th, up one spot) especially in terms of mobile broadband subscriptions and households with Internet access, although other important ICT services are not yet widely available. Businesses’ adoption of and the economic impacts of ICTs have been improving in recent years, but a gap still exists relatively with most advanced economies in this area. Furthermore, patent activity, both general and ICT-related, remains relatively low.

Both reports highlight the UAE’s urgent need to improve its technology readiness and business sophistication pillars. This fact did not come as a surprise when the WEF found a correlation between GDP per capita and these specific pillars over time. Innovation and business sophistication are more closely associated with income levels in general, and in emerging economies and commodity-exporting economies in particular, than they used to be. The graph below shows how, since 2010, for these two groups, GDP per capita has become more closely correlated with the GCI’s technological readiness, business sophistication, and innovation pillars than it is with the infrastructure, health and primary education, and market-related pillars (goods markets efficiency, financial market development, and labor market efficiency).

Being an emerging economy and commodity exporter, the findings of this report could not be more relevant to the UAE. In fact, there are two main takeaways the country should keep in mind moving forward with its fourth industrial revolution agenda. First, optimizing organizations processes and the ability to integrate new technologies has proven to be a far more efficient alternative to stimulate economic growth than classic investments in basic physical and human capital, in the context of emerging countries. Secondly, the report highlights an opportunity for commodity exporters, such as the UAE to engage in innovative activities since the price changes experienced at the end of the commodity cycle combined with faster technological advancement create an incentive for doing so.

In order to materialize and implement the two crucial aforementioned recommendations, and while keeping in mind its ongoing initiative towards getting ready for the fourth industrial revolution, the UAE needs to embed in a five pillar policy reform to its 4IR strategy:

Data utilization: the country will need to maximize data utilization for optimum returns. In order to do so, the UAE will have to create solid data markets and ensure the success of initiatives focusing on the facilitation of personal data utilization. Furthermore, the country will need to further clarify the processes of licensing and trademarking of artificial intelligence, such as intellectual property, securing appropriate compensation when technology or data is shared with a third party, and developing an updated utilization plan for existing intellectual property while taking the balance of protection and utilization into consideration, in order to promote innovation by smooth data utilization. Additionally, the country should aim to increase collaboration with the private sector in order to understand the competitive environment in the digital market and scrutinize key issues and challenges, while seeking to clarify what cannot be encompassed by existing laws and considering how the country should deal with areas that are not covered as its considers the need of new methodologies in a broad range of existing systems.

Innovation acceleration: Accelerating delivery to market of customer-validated innovations with a focus on leveraging new technologies and establishing disruptive business models is a cornerstone to achieving 4IR readiness status. More specifically and in terms of academic-industrial collaboration, the UAE will need to aim to substantially increase the size of investment to universities and R&D entities in the next ten years. Furthermore, the country should also aim to launch initiatives such as the newly created Area 2071 to transform its cities into global network hubs of entrepreneurs while strengthening strategic collaboration between large corporations and start-ups.

Agile business: The UAE will need to create all necessary systems and environments so that diverse corporate needs can be met to enable quick and flexible shuffling of business portfolios. The country will have to adapt a combination of agile methodologies in response to increasingly complex markets requiring faster validation learning loops.

Small and medium-sized enterprises (SMEs): The promotion of the trend of IT investment at SMEs, broadening from investing in internal control operations to business activities that produce actual profit such as the manufacturing process, service, sales activity should be the focus of this pillar. The UAE should seek to actively promote the introduction of robots to support automation at the working level. In order to link the development of such basic platform systems with developing new business models, creating support systems for international standardization will be necessary. The objective will be to increase to the value added to services and products using new artificial intelligence.

Business sophistication: Last but not least, business sophistication is a key factor for innovation-driven economy that touches on the quality of a country’s overall business infrastructure, as well as the quality of its overall networks and operations and strategy of individual firms. The UAE’s pre-established Strategy for the Future needs to be shared, and a concrete goal to be met within a mid-term timeframe is to be set. Furthermore, a roadmap needs to be created to include all the elements needed to attain this objective (reform of regulations, business promotion ideas, business development in the private sector, and self-regulations), followed by the development of a mechanism where the roadmap is altered as the situation changes while carrying out short term measures.

As countries prepare for the fourth industrial revolution, their respective leadership will have to pay the greater portion of their attention to competitiveness and sustainability. The UAE has set the values and vision needed to achieve its 4IR nirvana, and now needs to adapt the aforementioned recommendations to continue improving the innovation and business sophistication components of its environment.

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