INSEAD, Innovation & Policy Initiative 28 March 2012

Competitiveness and Innovation at Work in the UAE

STRICTLY CONFIDENTIAL

AGENDA

• About the Emirates Competitiveness Council & Competitiveness

• Innovation in the UAE

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Part 1: About the Emirates Competitiveness Council & Competitiveness

To ensure long-term prosperity of the nation, the UAE has

adopted competitiveness as a formal approach to its

development

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The Emirates Competitiveness Council serves as a conduit between the public and private sectors to actively influence policy creation

ECC plays a role in actively informing policy creation and process development while advocating for more effective policies, procedures and legislation that advance the UAE’s national, regional and global competitiveness.

UAE Federal Government

Minister of State

Against a backdrop of growing international competition of firms and nations, in May 2009, the Emirates Competitiveness Council (ECC) was established as the organizational framework for the UAE government to direct the country’s competitiveness strategy. Competitiveness is important to the UAE in order to:

► Achieve social prosperity and improve the quality of life

► Ensure economic growth and sustainable development

► Foster a knowledge based economy through innovation in all sectors

► Develop sectors of high productivity, that would lead to greater prosperity and well-being

ECC’s Board Members

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Title Name

Minister of State, Chairperson ECC Board H.E. Reem Al Hashimy

Secretary General of the Executive Council, Abu Dhabi H.E. Mohammed Dr. Ahmed Mubarak Al Mazroui

Secretary General, The Executive Council, Dubai H.E. Abdulla Al Shaibani

Secretary General, the Executive Council, Sharjah H.E. Sultan Bin Buti

Secretary General, the Executive Council, Ajman H.E. Saeed Said Al Matroushi

Secretary General of the Executive Council , Umm al Quwain H.E. Hamid Jassim Ali Khalfan Al Ali

Director-General of Sheikh Saqr Program for Government Excellence, Ras Al Khaimah

H.E. Mohammad Abdullatif Khalifa

Director of Fujairah Rulers Court H.E. Mohammad Saif Al Denhani

National Bureau of Statistics HE Rashid Al Suwaidi

Ministry of Economy (representative) Majed Ali Omran

Ministry of Finance (representative) Lubna Al Qassim ECC’s Board Meeting January 2012

ECC Board Meeting, January 2012

ECC works across four themes for public and private sector engagement

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Promote Competitiveness

Develop

Expertise

Advocate for Change

Champion government programs and UAE based companies that enhance UAE competitiveness and realize the country’s potential

Advocate for improved procedures, processes and

policies that help UAE to become a more competitiveness-friendly

Be UAE’s competitiveness thought leader and use internal expertise

to inform, educate and drive competitiveness issues with public

and private sector

Raise awareness of competitiveness locally and promote UAE’s competitiveness internationally

Champion

Competitiveness

Programs

Competitiveness is an economic development framework increasingly being adopted by countries around the world to promote their sustainable growth and prosperity

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“Competitiveness is the ability to achieve long term

Prosperity with a balance between Productivity &

Quality of Life for the nation”

Nation

Productivity

Balance

Quality of Life

Inspired by the UAE’s Vision 2021 ECC derives its vision and the country’s competitiveness agenda

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ECC Vision

To enable the UAE to become one of

the most competitive countries in the

world

UAE 2021 Vision

We want to be among the best

countries in the world by 2021

ECC Mission

To enhance UAE’s long term prosperity

through sustainable development and a

high quality of life for the nation’s

people

In the journey to achieve UAE’s vision, the nation as a whole should continue to focus on the building blocks of competitiveness

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Community

Effective Services

Policy & Regulations

Infrastructure

UAE nationals

• Business environment

• Investments • Trade

• Transportation • Energy • ICT • Financial • Education • Health • Judicial

System

• Social • Economic • Governance • Environmental

Along these building blocks the UAE has set competitiveness objectives:

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UAE Competitiveness Objectives

► Build a world class education system

► Facilitate Emiratis’ integration into private sector employment

► Empower Emiratis in leading private sector activity

► Develop transparent business-related procedures that are efficiently executed across all emirates

► Promote an effective business-friendly regulatory framework

► Support the competitiveness drive of all Emirates

► Further encourage competition in the domestic market

► Ensure quality of life in the UAE is attractive to foreign talent

► Build on current sectors competencies

► Plant the seeds for new innovation-driven/high productivity sectors

ECC Objectives

► Advocate UAE national’s competitiveness

► Raise national awareness of competitiveness and promote UAE’s competitiveness locally and internationally

► Advocate for Social, Economic and Legislative reforms that enhance UAE competitiveness

► Help establish a level playing field across the emirates

► Become a thought leader & a center of excellence on competitiveness

► Engage with the private sector in collaboration with UAE stakeholders to become a channel through which their competitiveness needs are identified and communicated

► Engage global ranking agencies and local entities to improve UAE’s ranking

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ECC has been supporting both Public & Private sectors in initiating new projects or initiatives

The ECC closely monitors UAE’s ranking in 11 reports 3 of which specifically track innovation and report back to the leadership on “to-do-list”

24 Indicators

Doing Business

► Annual- Sept.

► 100%*

Statistics

► 0%* Surveys

► 70 Interviews

Human Development Index

► Annual – Oct.

► 100% Statistics

► 0% Surveys

► No Interviews

4 Indicators

The Global Travel and Tourism

Competitiveness

► Annual- March

► 63% Statistics

► 37% Surveys

► 120 Interviews

73 Indicators

Global Information Technology

► Annual- March

► 45% Statistics

► 55% Surveys

► 120 Interviews

71 Indicators

Financial Development

► Annual- Oct.

► 80% Statistics

► 20% Surveys

► 120 Interviews

119 Indicators

Global Competitiveness

► Annual – Sept.

► 30% Statistics

► 70% Surveys

► 120 Interviews

111 Indicators

Global Innovation Index

► Annual- Sept.

► 68% Statistics

► 32% Surveys

► WEF Data

60 Indicators

The Competitiveness

Year Book ► Annual- May

► 68% Statistics

► 32% Surveys

► 50 Interviews

248 Indicators

Prosperity Index

► Annual- Oct.

► 52% Statistics

► 48% Surveys

► 100 Interviews

89 Indicators

Global Enabling Trade

► Annual-May

► 50% Statistics

► 50% Surveys

► 120 Interviews

54 Indicators

Global Gender Gap Report

► Annual-Oct.

► 0% Statistics

► 100% Surveys

14 Indicators

*All Doing Business Indicators are objective however they all have a degree of subjectivity because there is an analyst assessing

public information as well survey data 12

The UAE Ranks # 1 in the Arab World in 6 out of the 11 reports we monitor

2010-2012 UAE Qatar KSA Best Performer

Human Development Report 30/169 1st in Arab World 37/169 56/169 Norway

The Legatum Prosperity Index 27/110 1st in Arab World

_ 49/110 Norway

Global Enabling Trade Report 16/125 1st in Arab World

34/125 40/125 Singapore

Travel & Tourism Competitiveness 30/139 1st in Arab World 42/139 62/139 Switzerland

Global Information Technology Report 24/138 1st in Arab World

25/138 33/138 Sweden

Global Gender Gap Report 103/134 1st in Arab World

117/134 129/134 Iceland

Global Innovation Index 34/125 2nd in Arab World

31/125 44/125 Singapore

Doing Business Report 33/183 2nd in Arab World

36/183 12/183 Singapore

World Competitiveness Yearbook 28/59 2nd in Arab World 8/59 _ USA

Global Competitiveness Report 27/142 3rd in Arab World 14/142 17/142 Switzerland

Global Financial Report 25/60 3rd in Arab World _ 23/60 Hong Kong

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Indicator Rank

Corporate tax rate on profit 1

Consumption tax rate 1

Collected total tax revenues (%)

1

Effective personal income tax rate

1

Employee's social security contribution rate

1

Employer's social security contribution rate

1

Government subsidies (%) 1

Mobile telephone subscribers

1

Exchange rate stability 2

Dependency ratio 2

Mobile telephone costs 4

Consumer price inflation 5

Exports of goods (%) 5

Working hours 5

Indicator Rank

Mobile telephone

subscriptions

1

Gov’t procurement of

advanced tech

products

3

Business costs of

crime and violence

4

Quality of air

transport

infrastructure

4

Total tax rate 4

Extent and effect of

taxation

5

Firm-level technology

absorption

5

Burden of customs

procedures

5

Indicator Rank

Ease of hiring foreign labor 1

Access to improved drinking water

1

Mobile telephone subscribers 1

Effectiveness of marketing and branding

1

Sustainability of T&T industry development

3

Business costs of crime and violence

4

Quality of air transport infrastructure

4

International air transport network

4

Extent and effect of taxation 5

Travel & Tourism Competitiveness Report 2011 (T&T), UAE Ranked 30

Globally

IMD Report 2011, UAE Ranked 28 Globally

The GCR 2011-2012, UAE Ranked 27 Globally

Indicator Rank

Trading Across Borders

5

Registering Property

6

Paying Taxes 7

Getting Electricity

10

Doing Business Report 2012 UAE Ranked 33 Globally

Highlights of UAE's good performance include: (1/2)

Indicator Rank

Wastefulness of

government spending

5

Business costs of

crime and violence

3

Quality of air transport

infrastructure

4

Inflation, annual %

change

1

Business impact of

malaria

1

Malaria

cases/100,000 pop

1

Tuberculosis

incidence/100,000

pop

1

Extent and effect of

taxation

3

Total tax rate, %

profits

5

Flexibility of wage

determination

5

Gov’t procurement of

advanced tech

products

5

15

Indicator Rank

Financial stability 5

Taxes 3

Banking system stability 3

Retail access 12

Indicator Rank

Burden of customs procedures, 1–7 (best)

3

Cost to import, US$ per container 4

Documents to export, number 6

Cost to export, US$ per container 5

Paved roads, % of total 1

Quality of air transport infrastructure 3

Quality of roads 7

Quality of port infrastructure 7

Mobile telephone subscriptions per 100 population

1

Ethics and corruption 10

Government efficiency 7

Domestic competition 5

Openness to foreign participation 9

Ease of hiring foreign labor 1

Restriction on international capital flows

9

Reliability of police services 6

Business costs of crime and violence 7

The Global Enabling Trade Report 2010, UAE ranked 16 Globally

Financial Development Report 2011, UAE Ranked 25 Globally

The Global Information Technology Report 2010-2011, UAE Ranked 24 Globally

Highlights of UAE's good performance include:(2/2)

Indicator Rank

Burden of government regulation 10

Extent & effect of taxation 5

Total tax rate, % profits 5

Mobile network coverage, % pop. covered

1

Electricity production, kWh/capita 5

Mobile cellular tariffs (PPP $) 5

Gov’t prioritization of ICT 6

Gov’t procurement of advanced tech 3

Importance of ICT to gov’t vision 3

Mobile phone subscriptions/100 pop 1

Impact of ICT on access to basic services

5

Firm-level technology absorption 5

Gov’t success in ICT promotion 2

ICT use & gov’t efficiency 4

The UAE has also some challenges that we must address to remain competitive, things like….

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National Data

Systems

Foreign Ownership of

Companies

Social Cohesion

Women in the

Workforce

Entrepreneurship and

Access to Credit

Part 2: Innovation in the UAE ECC is open to feedback from international ranking institutions,

but reaching the country’s ambitious knowledge-economy goals

requires a strong collaborative approach between public and

private sectors

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ECC seeks to build on UAE’s success and foster a culture of innovation towards reaching its Vision 2021

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“To be amongst the best countries

in the world by 2021”

Theme 1: United in Ambition and Responsibility

Theme 4: United in Prosperity

Theme 3: United in Knowledge A Competitive economy driven by

knowledgeable and innovative Emiratis

Theme 2: United in Destiny

National Human Capital

Sustainable and Diversified Economy

Knowledge Based and Highly Productive Economy

► The UAE Vision 2021 is t working towards a

knowledge-based economy – driven by innovation

and a talented human capital

► The task requires exceptional co-ordination and

efforts from policy-makers, opinion leaders,

businesses and the public

► We have to promote a culture of competitiveness

across the country and also to benchmark our

competitiveness internationally

The link between innovation and the nation’s prosperity is a strong one

► Prosperity is the goal of economic development efforts

► To create more value, workers and their firms cannot deliver the same

old goods and services through the same old methods and processes

► They must do something new and better

► They must innovate

► For wages and profits to grow, workers and their firms must

create more value year after year

► To do so, they must boost productivity, or competitiveness

Productivity

“Competitiveness”

Prosperity

Innovation

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Innovations are new products, production or services methods that prove to be commercially or socially useful

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► “ .. the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies.” (Freeman, 1987)

► “.. that set of distinct institutions which jointly and individually contribute to the development and diffusion of new technologies and which provides the framework within which governments form and implement policies to influence the innovation process.” (Metcalfe, 1995)

► “An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”

http://stats.oecd.org/glossary/index.htm

OECD Definition for Innovation

► OECD recognizes 4 types of innovation: Product, Process, Marketing, Organizational ► Innovation can occur without advanced technology; and investments in technology can occur without much innovation ► Innovation does not necessarily mean invention, and it includes successful adaptation

Types of Innovation Recognized by OECD

National Innovation Systems – OECD definitions

The World Economic Forum’s Global Competitiveness Index classifies the UAE as an innovation-driven economy

Stage 3: Innovation Driven

Economies

Transition from 2 to 3

Stage 2:

Efficiency Driven Economies

Transition from 1 to 2

Stage 1: Factor Driven

Economies

Algeria (87) Egypt (94) Philippines (75) Qatar (14) Saudi Arabia (17) Sri Lanka (52) Syria (98) Ukraine (82)

Argentina (85) Brazil (53) Mexico (58) Oman (32) Russian (66) Turkey (59)

Switzerland (1) Singapore (2) Sweden (3) Finland (4 United States (5) Germany (6) Netherlands (7) Denmark (8) Japan (9) UK (10) UAE (27) Bahrain (37)

Economies at Stage of Development

Bangladesh (108) Cameroon (116) Ethiopia (106) Ghana (114) India (56) Pakistan (118) Yemen (138)

Bulgaria (74) China (26) Colombia (97) Indonesia (46) Jordan (71) Morocco (73)

The UAE is classified as ‘innovation driven’ based on its high per capita income levels as well as a certain level of economic diversification | 21

Innovation manifests in many forms and requires an innovation ecosystem

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R&D, Innovation and Entrepreneurship Activities

Human Capital (Scientists, Engineers, Inventors,

Designers)

Financial Capital & Infrastructures (Labs, Centers, Universities)

Innovation Outcomes

Innovation Inputs

Culture & Values (entrepreneurial spirit, innovation orientation, collaboration)

Source: Schumpeter, 1934; ECC team analysis

Marketing Innovation

Process Innovation

Product Innovation

Organizational Innovation

National Innovation Systems are institutional networks between entities that foster synergies to connect people, ideas and resources

| 23 Source: OECD, the Oslo manual, ADL, ECC team analysis

Market

VC’s & Financial Systems

Standards and Norms

Clusters Physical

Infrastructures

Infrastructure

Government:

Innovation Policies

Regulations Governance

Education

and Public or Private

Research Center

Private Sector:

Corporations and

SME’s

Best practice government policies are required to drive the innovation process and the private sector has a critical role to play

Source: Innovation Associates, “Accelerating Economic Development Through University Technology Transfer”, February 2005; Danish Ministry of Economic and Business Affairs, U.S. Congress, Office of Technology Assessment, “Technology, Innovation, and Regional Economic Development”, July 1984

A strong and focused university research base

feeds the pipeline for commercialization

Federal R&D funding provides a critical base for

technology transfer and commercialization efforts

Individual champions catalyze most successful

technology-based economic development

Early-stage capital is a critical ingredient in

launching university start-ups

Innovation centers can provide a focal point for

technology-based activities

The entrepreneurial culture of a university is

key to its technology transfer success

Successful technology transfer mechanisms are long term investments and can take decades to

accomplish

Private corporations can play a major role in

stimulating science and technology research

Technology development is more successful when it forms part of a broader regional development

strategy

Science & Technology Innovation Model

Commercial Application-Driven Innovation Model

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UAE is continuously upgrading its capabilities to be an enabler of innovation in various roles:

| 25 Source: Arthur D Little ECC team analysis

Innovation Policy

Lawmaker

Governance Framework

Educator

Researcher

Funder

Facilitator

► UAE has lowest software piracy rates in the Gulf and MENA, and improving protection for IP rights to support diversification into knowledge-based industries.

► UAE’s university system increasingly become a research driven. (e.g. Masdar Institute, UAE University, Khalifah University, Zayed University, Abu Dhabi University, NYU, etc)

► Government led research is slowly taking root (e.g. National Research Foundation, Center for Biosaline Agriculture, Masdar Institute, Imperial College London Diabetes Center)

► Funding process e.g. through awards (e.g. Young Emirati Innovator’s Prize, Patent Filing Award, Zayed Future Energy Award Fund -$4M- and several more)

► The Federal Government’s role as diffusion of innovation--Creating programs and forums for strategic innovation (e.g programs on innovation and entrepreneurship, Khalifa Fund, Mohammed Bin Rashid Establishment for Young Business Leaders)

The private Sector is our strategic partners in competitiveness and innovation

In addition to benchmarking through international reports, the ECC considers the voice of the private sector critical in improving its competitiveness performance

► The private sector is critical to UAE’s competitiveness and diversification of economy given its capacity to innovate, and its large pool of expertise and talent in the UAE

► ECC has heard valuable inputs and insights from our outreach to the private sector to inform our policy-making and growth strategies

► Based on private sector input we know the importance you place on innovation for sustainability and growth—and are working towards improving our performance in all these areas

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Some leading innovators include: (1/2)

| 27 Source: ECC team analysis

ICTs

High Technology

Biotechnology

Clean Technology

► Etisalat

► Du

► ICT Fund

► Biosaline Institute,

► Central Veterinary Research (Camel research)

► Imperial College Diabetes

► Julphar

► Masdar

► Masdar Institute

► Mubadala

► ATIC

► Mercator, Emirates Airlines

► Across all industries, across the whole value chain from supply chain to design, production and customer relationship management

► Agriculture (new crops)

► Medical (new drug development)

► Bioengineerin

► Pharmaceuticals

► In all industries

► Energy also concerns individuals and households

► Semiconductors, Computer science

► New materials

► Aviation related programming and software

Leaders Include Industry Applications include

| 28 Source: ECC team analysis

Leaders Include

Heavy industries, aeronautics

Clusters

Public-Private Partnerships

Industry-Academia Partnerships

► Abu Dhabi Aircraft Technologies (ADAT)

► STRATA & SANAD

► DUBAL

► Dubai Trade

► DP World

► Tejari

► Masdar Institute-MIT, NYU

► Semiconductor Foundry-ATIC

► Wamda-Abraaj Capital

► Dubai Media City

► Twofour54

► DIFC

► Aerospace technology

► Aluminum smeltering (proprietary technology)

► Logistics

► Trade

► Services

► Various

► Content creation

► Entertainment

► Marketing

► Finance

Industry Applications include

Some leading innovators include: (2/2)

Call to Action—we want your stories of innovation

ECC would like to hear about your story of innovation:

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Tell us your story:

► Please send us 3 paragraphs on your innovation –can be in Product, Process, Marketing, Organization or Services

► Small or Large companies or public sector entities

► R&D projects and expenditure

► Engagements of Training Institute-Industry Collaboration

► Public-private partnerships resulting in innovation

► Please send to: shaheena.mohamed@ecc.ae