Sectors such as finance, property development and tourism continue to drive the UAE’s non-oil economy
Economy Middle East speaks to Dr. Tariq Bin Hendi, senior partner at Global Ventures, on the UAE government’s role in supporting the country’s business environment. Dr. Bin Hendi also sheds light on the importance of sectors like finance, property development and tourism in boosting the UAE’s non-oil economy. Highlighting the UAE’s digitalization efforts, Dr. Bin Hendi expands on the impact of fintech and agritech on the local economy. He also highlights the growing venture capital (VC) environment in the UAE and the Gulf region with Dubai emerging as the fastest-growing VC ecosystem.
You have held senior roles at G42 and ADIO prior to this role. You have also worked with Emirates NBD, Mubadala and Citibank. What are the key steps local and international companies in the UAE have taken to keep abreast of the evolving times? What role has the UAE government played in this?
The UAE has recognized the economic opportunities that are now before us and the changes that it needs to make to seize them. Both local and international businesses embrace the UAE as a place to invest and do business. In particular, digitalization is fostering an ecosystem that supports emerging startups in fintech, agritech, and other sectors. Moreover, it is revitalizing existing businesses – providing a leapfrog opportunity for the UAE, and MENA more generally, to forge ahead and lead global innovation.
Importantly, the UAE authorities have not sat back and reacted to economic or technological events but have stepped forward and taken their own initiatives. This gives great encouragement to existing businesses and to those who might be located here. The UAE has also introduced initiatives and key strategies that contribute to the long-term growth of the country. This includes Dubai’s Economic Agenda (D33), which aims to solidify its position as a top three global city, and Abu Dhabi’s Economic Vision 2030, which seeks to put it on par with economies such as Norway.
While businesses thrive under light-touch regulation that fosters innovation, the ‘UAE Strategy for the Future‘ framework, instills confidence in companies and encourages investment. Hence, it aims to achieve specific goals like diversifying our economy away from over-reliance on energy production. As a result, the engagement between businesses and regulators is important and mutually beneficial to maintaining our reputation as a region with a dynamic business ethos for getting things done.
We have been talking a lot about diversification and moving away from an oil-based economy. Five years from now, which key sectors do you see contributing most to a non-oil-dependent economy like the UAE?
There are other key sectors that are well established in the UAE outside the energy industry, including the finance, property development and tourism sectors. These sectors continue to expand and lead innovation. Despite obstacles to growth, such as the recent pandemic, the UAE as a destination to live, work and play remains strong. Hence, it became the world’s second-highest relocation destination for high-net-worth individuals, attracting talent, investment, and additional employment.
An instrumental factor propelling this growth has been the recognition of the UAE as a prominent center for innovation among investors and entrepreneurs. There has been an increase in the number of startups — especially in fintech, agritech and healthtech in the UAE. Those startups can scale across continents and the world. In fact, entrepreneurship is a huge force of job creation in emerging markets. Its prevalence is 25 percent higher than in places like the U.S., thereby creating more employment opportunities.
The strategic application of AI in fields such as autonomous transportation, 3D manufacturing and construction can establish sectors that exceed expectations. Innovations introduced in the UAE hold the potential for global export, enhancing the country’s prominence in these areas.
Other sectors poised to contribute to the UAE’s diversified economy include supply chain technology. There is a growing emphasis on 3D and additive manufacturing. Moreover, the UAE is seeing the proliferation of renewable energy solutions as carbon-based energy sources are phased out. By addressing prevalent challenges, the UAE is facilitating economic diversification. Emphasizing innovation and cultivating new markets are central to the UAE’s entrepreneurial ecosystem.
What role do you see sectors such as fintech and agritech play in a diversified economy?
When people think of fintech and agritech it tends to be in the practical outcomes of speed, security and ease-of-use that digitalization brings to managing operations in these sectors. However, the real bonus of digitalization is how it opens up opportunities for previously unmet needs. Thus, it expands market access for consumers and producers, equipping people with the tools to build a new prosperous future.
People who could not easily access finance to create or expand a business suddenly can have transaction or credit histories that unlock their prospects. One of our portfolio companies, Paymob, provides cutting-edge financial technologies to regional SMEs. Its omnichannel gateway offers more than 40 payment solutions and access to innovative financial services for more than 250,000 merchants. By bridging the lending gap, businesses can access the necessary capital to meet expansion demands, open new premises, and contribute to the UAE’s diversifying economy.
The fintech sector will transform life for consumers of retail, hospitality, mobility and many other sectors. Now, we can expect the next beneficiaries to be the SME producers who serve them. To date, our portfolio has contributed to the financial inclusion of over 45 million people. Moreover, we will continue to provide opportunities for individuals and businesses.
In the Middle East and Africa, a considerably large portion of the population relies on agriculture for livelihood. In regional markets, the sector has far greater economic significance than elsewhere. Moreover, agritech is transforming the sector, ultimately diversifying the UAE’s economy. Iyris, an agritech company based in the UAE, provides a scalable solution that improves productivity and profitability for farmers in hot and water-scarce regions. Globally consumed produce is often grown in low-to-mid-tech greenhouses. Solutions like iyris increase productivity and profitability by boosting yields and cutting down on water and energy usage, offering immediate benefits. This helps change the country’s dynamics by developing previously unforeseen processing or industrial sectors.
The spin-out is that by growing various digital tech sectors, the UAE can gain a reputation as a source of theory, experience and know-how for digitalization. Digital innovation and its application can locate our future generations as the core of the modern world.
How is the current venture capital environment in the UAE and GCC compared to the rest of the world, especially the West which has been tackling a subdued economy for the last 6-8 quarters now? What does the 2024 outlook look like?
Venture capital in the UAE has been gaining momentum year-on-year, peaking at $3 billion across the region in 2022. The UAE alone received $1.2 billion from international investors. This emphasizes the country’s justified status as a rising global hub. In a recent Pitchbook analysis, Dubai secured the top position in a global ranking of the fastest-growing VC ecosystems.
Therefore, it’s no surprise that most regional deals occurred within the UAE, with 33 percent of deals closed between Q1-Q3 2023 – showing the growing potential of home-grown companies in the larger, global technology landscape.
The UAE has the benefit of a young population, with a median age of 33.5 years. This feeds a rapidly growing entrepreneurial ecosystem built upon a consistent, transparent regulatory framework. The combination is compelling for VC firms.
While we should be realistic about its scale, the growth opportunity is clear. The production of ideas, products and services with global applicability makes the region attractive. The region’s startup and VC ecosystem is consistently maturing, with several exits and prominent global investors such as Sequoia and QED participating in regional deals.
Have the UAE’s recent trade deals changed the trajectories of VC firms in the region? Are we seeing an increasing interest from overseas startups and companies who want to come into the region?
The UAE has been actively pursuing trade agreements that expand markets for all parties involved, improving its reputation as a global free-trading hub. Although it’s premature to confirm a definitive trend of increased business creation, investment and deal-making, the initial figures are indeed promising.
The 2022 FTA with India removed 80 percent of tariffs on goods between the two countries. It will also eventually eliminate them within 10 years. The deal covers service sectors and intellectual property while opening up opportunities for Indian investors. Moreover, it provides easier access to skilled Indian professionals to an anticipated 140,000 new jobs.
Foreign direct investment from the UAE to India improved more than threefold. It increased from $1.03 billion in 2021-22 to $3.35 billion, taking the UAE from being the seventh largest investor in India to becoming the fourth in 2022-23.
A similar deal is expected to be signed with Malaysia, following trade deals recently signed with Mauritius and the Democratic Republic of Congo. At the same time, negotiations have opened up with Australia this year.
In January, the UAE announced that it had been admitted to the BRICS group of countries along with Egypt, Ethiopia, Iran and Saudi Arabia. This serves as an expansion of diplomatic ties that is also likely to help Arab businesses build strategic relationships and scale their commercial expansion. Currently, BRICS economies account for 20 percent of global exports, which will increase as new members join. Implementing the agreement will open the floodgates to a new wave of investments helping Arab businesses realise their ambitions.
The combination of these deals will undoubtedly have a positive impact on VC as new sources of investment begin to flow into the UAE and new businesses become available to support. These trade deals are a welcome initiative from the UAE government and their impact will further help the country’s diversification and economic sustainability.
About Dr. Tariq Bin Hendi
Dr. Tariq Bin Hendi is a senior partner at Global Ventures. He is also the chairman of ENBD REIT and Edelman Middle East. Most recently, Dr. Bin Hendi served as the chief investment officer at G42. Prior to joining G42, Dr. Tariq Bin Hendi was the director general of the Abu Dhabi Investment Office (ADIO), where he expanded private sector activity in the emirate. Dr. Bin Hendi held leadership roles at various institutions, including Emirates NBD, Mubadala and Citibank.
Dr. Tariq Bin Hendi also sits on a number of boards, including Gulf Capital, UAE University, DGCX and Emirates Post Group. He holds a PhD in Economics from Imperial College London and a Master’s degree from Columbia University and London Business School. Dr. Tariq Bin Hendi has an undergraduate degree in business from Clayton State University.
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